TAXING THE PROFITS OUT OF POLLUTION

...One reason is that many individuals and organizations concerned with the environment have felt that, philosophically, taxing polluters was an ill-conceived approach tantamount to granting a license to pollute...

...If the tax is set at a level that is too high, it may have the effect of unfairly penalizing the producer even though he may have fully utilized the available technology to minimize the pollution which results from his production process...

...One of their main efforts this year will be to help gain support for the air pollution tax bill...

...Deaths from all respiratory diseases are up fifty per cent since 1950...

...Economically, the National Wildlife Federation estimates that air pollution costs the average American family $309 each year in damage to human health, residential property, materials, and vegetation...

...With a fair and reasonable tax this should almost never occur...

...Third, the polluter could pay the tax...

...Moreover, a tax is easier to enforce than direct regulation...

...Knowing roughly the answer to these three questions in any area of pollution makes it feasible and desirable to institute a pollution tax...

...Conversion to effective pollution abatement equipment would increase electric energy costs by only two per cent, according to EPA...

...This is not to say that the Administration's bill will necessarily be good legislation...

...Unlike the use of direct regulation, with the pollution tax there is no controversy over what is an acceptable level of pollution...

...Another bill I recently introduced would place a stringent tax, averaging about ten cents a pound, on the discharge of effluents into our nation's waters...

...if people did not want to buy a firm's product when that product's price comprises the total cost of production, including the pollution cost to society, then that product should not be made and the firm should go out of business...

...If they want some fresh air for, say, a picnic, it means that they will have to travel, possibly a long way, to have one...

...When a pollution tax goes into effect, a polluter has several options...

...Nixon again reaffirmed his support of an air pollution tax...

...The Environmental Protection Agency (EPA) reported that in 1967 more than 14,412,500 tons of sulfur—equal to 145 pounds per person—were dumped into the atmosphere in the United States from stationary sources...

...Simple and quick spot checks by the Government can easily insure the basic honesty of the polluter's monitoring reports...

...Relatively few people—although I am sure there would be some—would be willing to pay an extra sixty cents to buy a six pack of non-returnable cans or bottles rather than a six pack of returnables...

...First, he could stop producing and thereby stop polluting...

...A pollution tax which is set at a level higher than necessary to serve as an incentive for the polluter to take the most effective remedial action could still be a reasonable and appropriate tax as long as the tax is set at a level equal to or less than the total cost of pollution—including the external environmental costs...

...He won sixty-one per cent of the votes in his district, where he campaigned against his opponent's record on pollution...

...A second objection to the pollution taxing approach is that a pollution tax will raise a firm's cost, and the firm will simply pass these increased costs on to the consumer...

...When, and if, the Administration does make a specific proposal to Congress, we are likely to see some action on air pollution tax legislation...

...Thus, even if a tax of fifteen cents per pound on sulfur provided sufficient incentives for every steam electric plant in the United States to install the appropriate pollution abatement equipment, it would still be reasonable and appropriate to set the tax as high as twenty-five cents per pound, which is what EPA has estimated each pound of sulfur emissions costs us as a society in economic terms...

...In the case of many large manufacturers, polluters will not only respond to new technological advances, they may help create them—for the simple reason that there will be sufficient economic incentive for them to encourage (and pay for) pollution abatement research in those areas in which they are being taxed...

...Also, unlike using direct regulation, there is no controversy over when the regulation goes into effect...

...If this bill were passed, and if the average steam electric power plant continued to pollute at its present level, the plant would pay a tax of approximately $6 million per year...

...President Nixon, in his environmental message on February 8, 1971, announced his backing of air pollution tax legislation and appointed a top level task force to come up with specific legislation...

...Pollution tax legislation is only as good as the level of the tax...

...TAXING THE PROFITS OUT OF POLLUTION LES ASPIN It does not require an in-depth study of pollution in the United States to see that our present approach has been scattershot, and that progress has been uneven at best...

...The mere existence of a specific Administration proposal would be useful because it would help trigger Congressional and public discussion on an approach to combating pollution which has, in the past, often been misunderstood or ignored...

...There are, however, a few caveats concerning the value and use of pollution taxes that are important to note...

...He will do this when the cost of pollution control is less than the tax the producer would have to pay if he continued to pollute at his present level...

...The members of this coalition include the Sierra Club, Friends of the Earth, Environmental Action, the Wilderness Society, and Zero Population Growth...

...In other words, pollution taxes set at the right level would not only insure that the current pollution abatement technology was being fully utilized but would also accelerate the development of that technology...

...The chances of a concrete proposal this year are improved because of advances in technology...

...The thing to watch for in pollution tax legislation is the rate of the tax...

...It has also been argued that the big firms would have sufficient wealth to keep on polluting and pay the tax...

...the less the polluter pollutes, the less tax he has to pay...

...A second choice for the polluter is to install pollution abatement equipment...

...I believe these objections have resulted from a misconception of Government tax policies...

...The first example of how economic incentives would work is a bill aimed at air pollution which would place an immediate tax, escalating to twenty cents per pound by 1974, on sulfur emissions, one of the major sources of air pollution...

...A former professor of economics at Marquette University, Mr...

...The firm will qualify for a tax rebate when it proves through its own monitoring devices that it has reduced its sulfur emissions a certain amount below the maximum level, on which the initial tax is set...

...A third bill would require that a $50 deposit be placed on each automobile at the time of purchase, to be refunded when the car was properly scrapped at the end of its useful life...

...The five cent bottle deposit on returnables would clearly act as a strong incentive for people to return them rather than toss them out...

...The key to writing the tax is to keep it at a high enough level so that the vast majority of polluters will choose to take remedial action rather than continue to pollute at their present level and pay the tax...

...If the tax is too low, it may provide little or no incentive to the polluter to take remedial action...

...Would this tax provide enough incentive to reduce pollution...

...The reason that a million cars a year are now abandoned to rust along our streets and highways is simply because the price of hauling a car away in those cases would cost the owner more than the car is worth...

...The tax is set on a sliding scale...

...Deaths from lung cancer have increased 250 per cent from 1950...

...Under this new total-cost pricing system, products which cause pollution will cost more and people may well buy less of them, which is exactly what we want to happen...

...While the economic incentive approach is clearly not the most appropriate one to meet every environmental problem, it does have a number of advantages over the two other basic governmental approaches: subsidies to industry and direct regulation...

...The twenty cents per pound tax level in the air pollution tax bill is in-between and is, thus, both reasonable and defensible...

...It is obvious that economic incentives could be used to meet a variety of other pollution problems as well...

...On February 8 of this year the President reiterated his intention of proposing a tax on sulfur emissions...

...What follows are examples of bills I have introduced in Congress this session which make use of economic incentives (taxes) to combat pollution...

...Unlike subsidies to the polluter himself (the approach generally favored by industry), pollution taxes put the cost of cleaning up the environment where it belongs: on the polluter and the user of the polluter's products...

...At present, we have enough data in many areas of pollution to know what is causing the pollution, how much it is costing us as a society in objective economic terms, and what can be done to reduce the amount of pollution...

...But he will do this only when the cost of abatement is greater than the cost of the tax...

...Assuming these costs would be passed on to the consumer, this would mean that the consumer's average monthly electric bill, by our reckoning, would be increased from about $8.00 to $8.16—a pretty small price to pay for cleaner air...

...In the air pollution tax proposal, for instance, each industry that emits sulfur would be required to monitor its own emissions...

...Thus, the costs of air pollution are borne not by the polluter and the consumers of the polluter's product, but by the people who happen to live near the polluting factory...

...This not only costs many of the nearby residents their health, but costs them money because of increased medical expenses...

...An excellent indication of Congress's understanding of and commitment to preservation of the environment will be how it responds...

...It means that they will have to wash their clothes and paint their houses more often...

...In his energy message in June, he again expressed his strong support of such a proposal...

...One of the major reasons our present approach to pollution control has been ineffective is that we have failed completely to use one of the most potentially effective weapons in our anti-pollution arsenal: economic incentives in the form of taxes...

...In a recent report called "The Economics of Clean Air," EPA estimates that the average steam electric power plant emits 14,500 tons of sulfur annually...

...and regulatory taxes, such as tariffs, conceived to motivate people to act in certain ways...

...But the initial investment cost for pollution abatement equipment would run only $3.5 million, with a total annual cost of $1.5 million...

...the tax can be put on immediately, and when the amount of pollution is decreased the tax will decrease...

...the standards are clearer and more objective, and the need to rely on the discretion and good faith of the bureaucrat is minimized...

...Such a tax, set at the proper level to provide for maximum incentive, will have the effect not only of forcing the polluter to take initial action to combat pollution, but also of insuring that he will respond on a continuing basis to new technological advances which would reduce the amount of pollution the manufacture of his product causes, and therefore the amount of taxes that he has to pay...

...Only when all products for sale truly reflect the total cost of production ("external" as well as private costs) will we, as consumers, be able to make intelligent choices as to what to buy...

...There are two types of taxes: revenue taxes, like the income tax, designed to bring large sums of money into the Government coffers...

...Complicated and drawn out legal proceedings are avoided...

...But since air is "free," it is presently cheaper for an industry to continue to pollute rather than pay for pollution abatement equipment...

...The detailed content of these bills is not nearly so important as the approach they embody...

...In August, in the President's preface to the 1971 annual report of the Council on Environmental Quality, Mr...

...All of the pollution tax bills I have mentioned, with the exception of the water pollution legislation, have been referred to the House Ways and Means Committee, which has jurisdiction over tax proposals...

...Les Aspin, Wisconsin Democrat, was elected to the House of Representatives in 1970...

...Why have we not already adopted this approach of taxing polluters if it is such a good way of controlling pollution...

...But it may be too low, which would result in many polluters simply paying the tax and continuing to pollute at their present level, because it would be more profitable for them to do so...

...Emphysema, which was rare thirty years ago, now kills 25,000 people each year...

...A pollution tax is of the second type—the less money you collect under the tax the more effective the regulatory tax is...

...The dirty air the factory produces causes a higher incidence of respiratory diseases and other health hazards...

...At present, many people are buying products which cause a lot of pollution because the price of that product does not reflect the total cost...

...A second bill would place a ten cent tax on all non-returnable bottles and cans, and would require that a five cent deposit be collected on all returnables...

...I agree that a pollution tax will do just that...

...For example, people living near a sulfur-belching factory are the ones who presently pay the cost of that factory's pollution...

...Air pollution, our most serious environmental problem, was worse in 1971 than in 1970...

...It is noteworthy that a new coalition of conservation groups has just been formed to support pollution taxes...

...You can wager that the tax rate in the Administration's promised proposal will not be too high...

...rather, it is to suggest that a truly comprehensive attack on pollution requires us to utilize this important approach as well...

...They are designed primarily to illustrate how we can utilize the strongest incentive in the free enterprise system—profits—to help effect a unified, immediate, and continuing reduction in pollution...

...It is important to remember that this tax would also be imposed on all the polluter's competitors...

...This is not to say that the economic incentive approach should replace our other environmental efforts...

...This legislation would clearly make it more profitable, in virtually every case, for the owner to have the car hauled to the scrap yard so that he could collect the $50 deposit, rather than abandon the machine and lose the deposit...

...Aspin has served on the staffs of the Council of Economic Advisers, Secretary of Defense Robert McNamara, and Senator William Proxmire...

...Thus, it would obviously be much more profitable for a steam electric power plant to install the pollution abatement equipment rather than continue to pollute...

...The bill with the greatest chance of getting action is the air pollution tax...

...But the increased cost of the product will be borne by the consumers of that product...

...One excellent indication of the depth of the Administration's commitment to the environment will be the specific air pollution tax rate proposed in its legislation...

...These consequences are part of the real costs of a product's pollution...

...The tax would initially be established at the maximum level, based on the assumption that the firm will do nothing to reduce the level of its sulfur emissions...

...There is, however, some leeway here...

...EPA has estimated that each pound of this pollution costs society twenty-five cents—more than $140 per year for a family of four...

...None of the proposals has been acted on yet...

...Thus, the burden of proof is essentially placed on the polluter, not the Government...