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An Ecotax, short for Ecological taxation, is a fiscal policy often proposed by Green political parties and conservationist interest groups, intended to promote ecologically sustainable activities via economic incentives. Since sustainability is usually defined in terms of the depletion of natural and non-renewable resources, an ecotax would increase the cost of using these resources while proportionately reducing taxes on human labor and renewable resources. Ecological fiscal reform, also known as the green tax shift towards ecological taxation, is viewed as a policy shift which compliments or averts the need for regulatory approaches.
Examples of taxes which could be lowered by a green tax shift:
- Payroll and income taxes.
- Corporate taxes (taxes on investment and entrepreneurship).
- Property taxes on developed land (relative to undeveloped land).
Examples of ecotaxes to be implemented or increased:
- Carbon taxes on the use of fossil fuels.
- Taxes on the extraction of mineral, energy, and forestry products.
- Licence fees for fishing and hunting.
- Specific taxes on technologies and products which are associated with substantial negative externalities.
- Garbage disposal taxes.
- Taxes on effluents, pollution and other hazardous wastes.
- Site value taxes on the unimproved value of land.
Tax shifting may include balancing taxation levels to be revenue-neutral for government, industry or consumer groups.
Taxes on consumption may take the feebate approach advocated by Amory Lovins in which additional fees on less sustainable products — such as sport utility vehicles — are pooled to fund rebates on more sustainable alternatives — such as hybrid electric vehicles.
The object of a green tax shift is often to implement a "full cost accounting", using fiscal policy to internalize market distorting externalities, which leads to higher efficiency and sustainable wealth creation.
Progressive or Regressive?
Some green tax shift proposals have been criticized being fiscally regressive (a tax with a marginal rate that decreases as the taxpayer's income increases). Taxing resources usually implies taxing consumption, and since the poor consume more and save or invest less as a share of their income, any shift towards consumption taxes is considered regressive. Correctly assessing distributive impact of any tax shift requires specifics, eg. is the increase in the (moderately regressive) carbon tax more than offset by the decrease in the (highly regressive) payroll tax? Some proposals claim a second benefit of increased employment or lower health care costs as the market and society adjust to the new fiscal policy. These claims, as with the claim "tax cuts create jobs" are theoretical and speculative: very difficult to prove or disprove even after the fact.
Ecotax policies enacted
An ecotax has been enacted in Germany by means of three laws in 1998, 1999 and 2002. The first introduced a tax on electricity and petroleum, at variable rates based on environmental considerations; renewable sources of electricity are not taxed. The second adjusted the taxes to favor efficient conventional power plants. The third increased the tax on petroleum. At the same time, income taxes were reduced proportionally so that the total tax burden remained constant.
See also
- Sin Tax
- Energy Tax Act
- Green politics
- Nuclear power phase-out
- Free-market environmentalism
- Pigovian tax
External links
- Redefining Progress
- Fiscallygreen.ca
- Earthrights.net
- A Distributional Analysis of Green Tax Reforms - Gilbert E. Metcalf
- WorldMoralMovement.org - Green tax as part of a moral tax code
"Ecotax"