Pollution taxes have been embraced by a growing number of mainstream economists and policy makers. Stanford economist Lawrence Goulder calls such taxes "corrective taxes" because they correct the distorting price signals now given to resource depletion. Ex Federal Reserve Chairman Paul Volcker and former Council of Economic Advisors Chairman Martin Feldstein have suggested using a carbon tax to reduce the federal deficit.[1] The Ford Motor Company and the GAP have supported a proposed carbon tax in California that would have replaced a portion of the state's retail sales tax.[2]
Green taxes are not new. In the last 15 years such taxes have been used for two primary purposes:
* to generate revenue to pay for damages created from past pollution and for measures to reduce future pollution
* to change behavior
A third type of green tax discussed below has been gaining visibility. It combines a significant pollution tax with a major restructuring of the tax system to make the overall economy more efficient. This process is called "tax shifting".
Green Taxes Designed to Finance Remediation and Prevention Measures
These taxes are used to generate revenue to pay for the damages and cleanup costs from pollution and to pay for measures to reduce future pollution.
* Minnesota Solid Waste Tax.
In 1989, Minnesota extended the 6.5 percent sales tax to garbage services and in 1990, raised $24.3 million. A portion of this money has been used to finance recycling and waste minimization programs and to provide loans and grants for recycling businesses. Another portion goes to close down polluting landfills.[3] Minnesota also collects a 2 cent per pound tax on toxic chemicals listed on the Toxic Release Inventory.
* California Tobacco Tax.
Assuming a $2,000 investment per home, the $75 million from the carbon tax would serve an additional 37,500 homes per year. In addition to existing low income programs, this would allow the entire low income household population to be served within about 10 years.
Two recently proposed state carbon taxes have specifically targeted a certain percentage be used for low income energy efficiency programs. In January 1992 a $3.75 per ton carbon tax was introduced in the Maryland Senate. It would have raised $100 million a year. Twenty one million dollars of those revenues were targeted for low income weatherization and energy assistance programs.
In April 1992 Minnesota State Senator Steve Morse introduced the Sustainable Energy Transition Act. The $6 per ton tax would have raised about $150 million a year. About 15 percent of this was targeted to low income energy programs