Environmental Taxes
Do
you reconcile the introduction of environmental-based tax rate differentiation
as well as new environmental taxes with the traditional objectives of fiscal
reform: tax simplification, fiscal neutrality (not affecting behavior)? A1. This
has to be done very carefully, as introducing new taxes that are related to the
environment, can dramatically affect peopleís behavior. If you levy new taxes
on vehicles that produce high amount of pollution, like Sport Utility vehicles
people are no longer going to purchase those vehicles. This tax is something
that has to be eased on to the public and the public has to be educated as to
how these environmental taxes will work. The bottom line is that the public
needs to be educated as to why these taxes are being levied. Q2. With the
exception of a lump-sum tax, all conventional taxes have distortion cost in the
form of affecting the taxpayerís economic behavior: work-leisure choice,
consumption-savings allocation, etc. Wouldnít environmental taxes have the
same dead weight loss by affecting consumption and production behavior? A2.

These taxes would not be a dead weight loss because after the public was
educated, I believe that they would be aware the there was considerable
environmental benefit involved with these new taxes. They also might make people
think twice before polluting the environment, because they may realize that the
end result is that they are paying to clean it up. Q3. What is the
distributional incidence of environmental taxes? Or, Who benefits and who loses
from specific taxes, how can distributional concerns, a major constraint to the
acceptability of environmental taxes, be addressed in a satisfactory way? A3.

The general public are those who will benefit from these new taxes, due to the
fact that pollution will be reduced and the environment will become cleaner and
a better place to live. This tax also improves income distribution, and will be
distributed proportionally across the board. It will also improve the
environment by saving money and realigning polices that are setup as an
incentive to practice environmentally sound practices. This is set up to improve
economic efficiency and reduce waste that is produced by public and state
enterprise. The distributional cost will be addressed through a proportionally
distributed tax, and not a disproportion tax that benefit the rich. Q4. How do
you address International competitiveness concerns raised by industry with
regard to (unilateral) Introduction of environmental taxes? A4. This should be
handled very carefully, if taxes are introduced unilaterally, this could risk
pricing itself out of the market. The reason for this is if the taxes were to
dramatic, companies may take their industry, and plants outside of the country,
thus loosing millions in other types of tax revenue, jobs and other economic
well being. Q5. At what level should taxes on particular products be set in
order to reflect the environmental costs associated with their production and
use? A5. Tax levels should be set so that they donít exceed a certain
percentage of the cost of the product. If there are situations in which the
products environmental cost would be higher than the cost of the product, there
should be some type of tax ceiling; a fair figure would probably be around 25%
of the cost. These levels should be set in order to maintain control on
pollution, while at the same time, not making them so expensive so that the
specified product is priced out of the market, reducing demand, forcing
consumers to seek a substitute product. Q8. What is the preferred type of
environmental Taxes? What determines the choice between direct taxes (on
emissions) and indirect taxes (on products and inputs)? A8. The preferred tax is
a direct tax which typical which will affect industry, and consumers depending
on their income and amount that the pollute. Indirect taxes are unfavorable
because they put a tax burden on products such as food clothing and shelter,
which are the commodities that the poor spend a higher percentage of their money
on in relation to those who are wealthier. The government when implementing
taxes determines, how much revenue needs to be created, and how they me obtain
the most exposure to pay for the tax. For example those who use The Mass Pike
are taxed by paying the tolls. This doesnít cover the entire cost of operating
the highway system, but subsidizes the operating cost. Q10. What is the
difference between taxes and charges? Under what conditions are environmental
taxes and charges identical? Which do you feel is politically more acceptable?

A10. The difference between taxes and charges is that the charges were set up
after the damage was done, and the tax