NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Have Separate Environmental Taxes?

Don Fullerton

NBER Working Paper No. 5380 (Also Reprint No. r2072)
Issued in December 1995
NBER Program(s):   PE

Each environmental tax in the U.S. is designed to collect revenue for a trust fund used to clean up a particular pollution problem. Each might be intended to collect from a particular industry thought to be responsible for that pollution problem, but none represents a good example of an incentive-based tax designed to discourage the polluting activity itself. A different tax for each trust fund means that each tax rate is typically less than one percent. But each separate tax has an extra cost of administration and compliance, since taxpayers must read another set of rules and fill out another set of forms. This paper provides evidence on compliance costs that are high relative to the small revenue from each separate tax. In addition, an input-output model is used to show how current U.S. environmental tax burdens are passed from taxed industries to all other industries. Thus the extra cost incurred to administer each separate tax achieves neither targeted incentives not targeted burdens.

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Document Object Identifier (DOI): 10.3386/w5380

Published: Why Have Separate Environmental Taxes?, Don Fullerton. in Tax Policy and the Economy, Volume 10, Poterba. 1996

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