WRI Publications Feed: Green Fees

Eliminating Tax Expenditures with Adverse Environmental Effects

admin — Tue, 01 May 2007 00:00:00 -0400

Tax expenditures are provisions in the U.S. federal tax code that provide special tax benefi ts for selected economic activities or taxpayers. A number of tax expenditures add to greenhouse gas emissions by encouraging production and consumption of fossil fuels.

This policy brief examines four tax expenditures listed by the Joint Committee on Taxation—each with an annual revenue loss of over $1 billion—that increase consumption of fossil fuels. The first three—expensing of exploration and development costs, percentage depletion, and the alternative fuel production credit—encourage domestic production of fossil fuels. The fourth—exemption of qualified parking expenses—encourages commuting by automobile.

Eliminating or scaling back these and other tax expenditures that promote production and consumption of fossil fuels would reduce the budget deficit, promote economic efficiency, and be a first step toward making the tax law more environmentally friendly. However, the effects of the proposed tax reforms on greenhouse gas emissions would be small—so addressing tax expenditures, while desirable for a number of reasons, can be only one part of a broader strategy to reduce climate change.

A Green Employment Tax Swap: Using a Carbon Tax to Finance Payroll Tax Relief

admin — Tue, 01 May 2007 00:00:00 -0400

As the new Congress convenes, both Democratic and Republican lawmakers are proposing limits on greenhouse gas emissions. Most of these proposals are for carbon cap and trade systems similar to the European Union Emissions Trading System.

A carbon tax is another way to limit emissions. This policy brief describes how a carbon tax could be implemented and presents an analysis of a Green Employment Tax Swap (GETS). Under this proposal, a national tax on carbon emissions is paired with a reduction in the payroll tax. In particular, the brief assesses the impact of a tax of $15 per metric ton of carbon dioxide (CO2), which is used to rebate the federal payroll tax on the first $3,660 of earnings per worker. This reform is both revenue-neutral and distributionally neutral.

Greening the Tax Code

admin — Sat, 01 Apr 2006 00:00:00 -0500

In recent years several Republican and Democratic governors have imposed new pollution taxes, often winning bipartisan acclaim. A growing number of commentators have supported such measures at the federal level.

Analysis indicates that taxes on air and water pollution could generate substantial revenue for the U.S. Treasury while improving environmental quality, stimulating technological innovation and enhancing energy security. Reducing tax expenditures with adverse impacts on natural resources could do the same. As lawmakers explore ways to reduce federal budget deficits and reform the tax code, they should consider measures that shift more of the tax burden onto activities—such as pollution—that make the economy unproductive or reduce quality of life.

This policy brief examines fiscal instruments that both raise revenue and help improve environmental quality. The paper analyzes several different types of pollution taxes, considers current tax expenditures with adverse environmental impacts, discusses ways of integrating these instruments into tax reform packages and suggests directions for further research.

Taxing Carbon to Finance Tax Reform

admin — Wed, 01 Mar 2006 23:00:00 -0500

In this issue brief, WRI and Duke Energy explain how instituting a carbon tax would simultaneously support federal tax reform initiatives, reduce carbon dioxide emissions, and promote sound energy policies.

Summary

Reforming the federal tax code could advance economic growth as well as help the United States address a number of its environmental and energy challenges. A carbon tax, in particular, is an effective fiscal policy option that would simultaneously support federal tax reform initiatives, reduce carbon dioxide emissions, and promote sound energy policies.

A carbon tax is a consumption tax levied on the carbon content of oil, coal, and natural gas. Taxing the carbon content of these fossil fuels is an efficient means of assigning costs to the carbon dioxide emissions they release when burned for energy.

A carbon tax would be relatively easy to administer. It could be collected where fossil fuels enter the economy, such as ports, oil refineries, natural gas providers, and coal-processing plants. Applying the levy to as few as 2,000 entities could reach nearly all the fossil fuel consumed in the U.S. economy and would cover 82 percent of U.S. greenhouse gas emissions.

A carbon tax would generate significant revenue. According to the Congressional Budget Office, a tax of $12 per metric ton of carbon that gradually rises to $17 per metric ton of carbon would generate $208 billion in revenue over a ten year period.

Revenue from a carbon tax could be used to finance other tax reform initiatives. A carbon tax could be incorporated into a number of revenue-neutral tax reform packages, with the proceeds supporting reductions in inefficient existing taxes on productive labor and investment.

A carbon tax dovetails sound tax policy and sound climate change policy. Climate change policy in the United States would be most effective if it were federal, economy-wide, and market based. A carbon tax meets all these criteria. A tax that starts at a modest rate and increases gradually and predictably over time would establish incentives throughout the economy to reduce carbon dioxide emissions with minimal disruption. Moreover, by encouraging a less carbon-intensive economy, a carbon tax could help improve the nation’s long-term energy security.

A green approach to tax reform

admin — Sun, 01 Jan 2006 00:00:00 -0500

Tax reform and the environment: Why and how?

admin — Wed, 01 Jun 2005 00:00:00 -0400

Text of comments from the June 3, 2005 Tax Reform and the Environment seminar.

Draft Comments by Steve Ellis for Brookings/WRI event on environmental harmful tax breaks

admin — Wed, 01 Jun 2005 00:00:00 -0400

Text of comments at the June 3, 2005 Tax Reform and the Environment seminar.

Taxing Bads

admin — Wed, 01 Jun 2005 00:00:00 -0400

Pollution Taxes in a Second-Best World

admin — Mon, 01 Sep 2003 00:00:00 -0400

Plenary Address for the Conference on “Tax Policy in EU Candidate Countries On the Eve of Enlargement” Riga, Latvia, September 12, 2003.

Introduction by author:

“I have decided to spend my time discussing recent issues involved in setting environmental taxes in a second-best world. This is an area that has seen an explosion of research and new insights over the past decade and also an area with which many EU countries (as well as candidate EU countries) have been grappling. The basic message of my talk (if there is one) is that the policy prescriptions that most of us learned when studying environmental policy in isolation (that is, in partial equilibrium) often must be significantly adapted once one moves to a general equilibrium framework with pre-existing distortions. Put this way, there is nothing novel here; it is simply a restatement of the Theorem of the Second Best (Lipsey and Lancaster (1956-1957)). This, however, risks trivializing the literature of the past decade. As a contributor to that literature, I’d prefer not to do that. More to the point, there are some very interesting results that bear discussion.”

Download a PDF version of this working paper:
http://ase.tufts.edu/econ/papers/200316.pdf

The Costs of Climate Protection: A Guide for the Perplexed

admin — Sun, 01 Jun 1997 00:00:00 -0400

The United States and other nations are committed under the Framework Convention on Climate Change to prevent greenhouse gases from accumulating in the atmosphere, but the economic impacts of limiting greenhouse gas emissions are almost as uncertain as the impacts of climate change themselves.

The Costs of Climate Protection breaks down the economic models currently used to analyze climate policy options by examining the key assumptions built into these models.

The Costs of Climate Protection looks at how assumptions affect predicted costs and offers favorable policy options. These options include:

how the United States can and should negotiate with other nations in stabilizing carbon emissions through a system of joint implementation;

how the federal government can restructure the tax system to lower income and payroll tax by making up the revenues through energy taxes; and

how to make renewable, non-fossil energy sources more widely available at lower prices.

The authors conclude that if the United States and other countries follow the basic measures outlined in the report, climate protection will not adversely affect the economy.

This report was the first in a series produced by the Climate Protection Initiative – a partnership between WRI and private firms to identify acceptable policies and business strategies for achieving strong climate protection goals.