Concluding remarks
Regulatory taxes can be of two kinds. Alongside the well-known Pigouvian taxes, law and economics analysis points to a second, more radical type. In the context of environmental taxation, an effective ecological tax is a tax credit on personal or corporate income taxes upon certifications of an ecological improvement scheme.
The tax credit kicks in when the scheme becomes effective. The operation of the scheme depends solely on the cooperation of taxpayers; it requires no additional information on the part of necessarily underinformed public authorities. Interestingly, there is a double dividend in the sense that, along with an ecological improvement, there is a new revenue stream for the government.Notes
1. I should like to thank Antony Dnes, Santos Pastor, Peter Senn, Richard E. Wagner and Wolfgang Weigel for helpful comments.
2. In mentioning Pigou’s name, I feel compelled to add that Pigou himself felt corrective taxes to be impossible, as the taxing authority would lack the requisite information: ‘But the practical difficulty of determining the right rates of bounty and of duty would be extraordinarily great. The data necessary for scientific decision are almost wholly lacking’ (Pigou, 1947, pp. 42-3).
References
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Bovenberg, L. and R. de Mooij (1994), ‘Environmental levies and distortionary taxation’, American Economic Review, 84 (4), September, 1085-9.
Buchanan, J.M. (1969), Cost and Choice: An Inquiry in Economic Theory, Chicago: Markham. Pigou, A.C. (1947), Socialism vs. Capitalism, London: Macmillan.
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