CitiesGoGreen - October 2008 - (Page 31) For all the drama of Mr. Dahle’s statement, its basic message is in any Economics 101 textbook. The free market is very good at allocating resources when prices take actual costs into account. When prices do not take actual costs into account, the free market can misallocate resources, sometimes disastrously. There is no better example than environmental costs. I part ways with Mr. Dahle, however, in describing this as an inherent fault of capitalism. The fault is in our passive approach to a well-understood failure of the market. Conceptually, it is not difficult to identify taxes or fees that could incorporate ecological costs into market decisions. But, that doesn’t make it easy to do, because fundamental change is never easy. If it were, the need for change would never have developed. Yes, it might be difficult to set the perfect rates for natural market forces to satisfy a peer-reviewed economic study. But to set that up as an obstacle makes the perfect the enemy of the good. Actual rates could be based on more practical concerns, such as how much voters are willing to pay, how much a given rate would likely reduce environmentally damaging behaviors, and how fairly a rate would distribute the burden of paying for environmental restoration across multiple revenue sources. The last point gets at the other major reason why environmental sin taxes should be set high enough to reduce other taxes. We sin a lot, in a lot of ways. It’s not fair—and it would not be effective—to single out just one or two of our behaviors to raise revenues for conservation. The more sins we leave out, the more ways in which we as a society continue to subsidize environmental degradation. If we address the breadth of these subsidies, we will have more than enough money for ambitious conservation programs (including payment to farmers and other landowners for ecological services, but that’s another story). Reducing other taxes is the logical next step. It is striking to consider the degree that legislative bodies have turned to existing sin taxes, particularly on cigarettes, over the past decade for new revenues. The line of thinking has been simple—we need to raise money. Increasing income, property, or sales taxes is unpopular. Smoking harms both the smoker and society, so we ought to discourage it. A high tax accomplishes this effectively: voilà, October 2008 In the United States gasoline and vehicle taxes combined typically don’t even cover the full cost of constructing and maintaining our roads, let alone their broader environmental consequences. a high tax on cigarettes is good. When new revenue needs have come along, it has been hard not to argue, “the higher, the better” (cigarette taxes have reached $4.25 per pack in New York City). The most popular other “sin” tax has generally been on alcohol. But in my hometown of Seattle, there is a new candidate: disposable grocery bags. The City Council recently adopted a 20-cent fee on such bags (paper and plastic), modeled on a successful program in Ireland that has reduced the use of disposable bags by 90 percent. Seattle Public Utilities estimates the fee could raise $10 million a year, which will mostly go toward waste prevention, recycling and environmental education programs. Do I really do 20 cents worth of harm to the environment every time I accept a disposable grocery bag? If I recycled the bag, how would that affect the calculation? Should there be a price differential if I choose paper vs. plastic? None of these questions was seriously considered, and that’s fine. Among advocates, the only major point of debate was whether 20 cents is enough to get people to switch to bringing their own reusable bags. (Some argue that in Ireland, a 20-cent tax was insufficient for that purpose, but a 33-cent tax did the job.) Disposable grocery bags are a relatively easy, symbolic target, though not without ecological significance. Let’s get to the tougher cases. If we use natural market forces to correct some of our greatest subsidies for environmental degradation, we can save the environment and reduce taxes at the same time. Why wait? John Lombard is the author of Saving Puget Sound: A Conservation Strategy for the 21st Century (see www.savingpugetsound.com for details). He is a lecturer at the University of Washington, and serves as a liaison with user groups for PRISM, a program that coordinates research and modeling efforts for Puget Sound. He has 15 years experience working in local government, and six years as a private consultant. 31 http://www.envisionsolar.com http://lifeportsolar.com http://www.envisionsolar.com http://www.savingpugetsound.com http://citiesgogreen.com
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