Greening The Budget essays

Greening The Budget essays Earning a Double Dividend in the Process Q1. How 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 peoples 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 taxpayers economic behavior: work-leisure choice, consumption-savings allocation, etc. Wouldnt 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 als...