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56 IRET Policy Bulletin 1 (1992)

handle is hein.taxfoundation/iretpbul0015 and id is 1 raw text is: July 3, 1992 No. 56 EXCISES, SOCIAL COSTS, AND THE MYTH OF EFFICIENT TAXATION: THE CASE OF CARBON TAXES The primary function of [pollution] taxes is to make the economy function more efficiently. Through their use we have the opportunity to employ the tax system, not only to raise revenues but also to enhance the operations of the economy.' With the dual public policy concerns of increasing federal revenues and rectifying perceived environmental problems vying for the attention of lawmakers, the view expressed by economist Wallace Oates has been steadily gaining attention and acceptance. According to this view, the use of excise taxes to address problems related to the environment offers the best of all worlds. It allows the government to reduce the social costs associated with certain production activities while enhancing both economic efficiency and revenue flows to the treasury. What better policy tool could a politician ask for? pollution taxes may raise revenues, but they will not enhance the operations of the economy. Political considerations not economics, dictate the imposition of these taxes. In fact, pollution taxes may raise revenues, but they will not enhance the operations of the economy. Political considerations not economics, dictate the imposition of these taxes. The most likely outcome of levying a pollution tax is the same as that of any other tax. There will simply be a transfer of resource claims from the private to the public sector and a reduction in efficiency and 'Wallace E. Oates, A Pollution Tax Makes Sense, in Herbert Stein, ed., Tax Policy in the Twenty-First Century, (New York: John Wiley and Sons) 1988, p. 254. Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational Research organization devoted to informing the public about policies that will promote on the economic growth and efficient operation of the market economy. Economics of 1730 K Street, N.W., Suite 910 * Washington, D.C. 20006 Taxation (202) 463-1400 * Fax (202) 463-6199 e Internet www.iret.org