Green taxes

April 1, 2011

Green taxes

Potential revenue for Illinois?

Authors

In general, green taxes are taxes either directly on pollution emissions or on goods whose use causes pollution. In the revenue-raising context, the basic argument for green taxes can be summarized by the adage: “tax waste, not work.” Taxes on labor income discourage workers from engaging in productive activities, and thus hurt society. Taxing waste, by contrast, discourages harmful pollution, and thus benefits society. In addition, the revenue raised from these green taxes can help mitigate the state’s fiscal crisis.

While many green taxes could be implemented, the authors of this issue of Policy Forum focus on four specific examples that have the potential to raise large amounts of revenue: carbon pricing, gasoline taxes, trucking tolls, and garbage fees. Indeed, a reasonable set of tax rates on these four items could generate as much revenue as the income tax increase. That is, imposing green taxes could completely fill the $3.8 billion difference between the projected baseline deficit ($10.9 billion) and the post-tax deficit ($7.1 billion).


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Research Area: Economic Policy

Policy Initiative: none

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