Green Taxes that Save People Money
-
Upload
autumn-koch -
Category
Documents
-
view
32 -
download
0
description
Transcript of Green Taxes that Save People Money
Green Taxes that Save People Money
David C. Denkenberger
Green Engineering
April 16, 2001
Contents
• Introduction
• The future cost tax concept
• Quantative example
• Worker retraining
• Reducing income taxes
• Implications
What People Buy
• Products that pay back in less than 2 years– Imperfect information (bounded rationality)– Sticker shock– Distrust of advertising claims– Buying on credit– Future use uncertain– Future electricity price uncertain– Bad reputation from earlier products– Irrationality
Economics Literature Search
• EconLit (economics database in LIAS)
• (((imperfect or assymetr*) and information) or irrational* or (not and rational*) or (bound* and rational*)) and (tax* or subsid* or permit* or rebat*)
• Nothing relevant
Environmental Literature
• NRDC
• Rebates for efficient appliances from electric utilities
• Only profitable to utility if it reduces peak demand significantly (small participation)
• Bold efficiency targets (uninformed)
Supply and Demand
Price
Quantity
Demand
Supply
Actual benefit
QoptQeq
Tax
The Future Cost Tax Concept
• Make the perceived cost = actual cost– Tax visible purchases to reach hidden costs– Tax maintenance costs to encourage a new
efficient model purchase– Tax product purchase price representing future
maintenance costs, e.g., energy– Tax product purchase price representing future
product purchase costs: buying the product again
Future Cost Tax Example
• Assume social cost = personal cost = $1.50/gal
• Hidden costs (depreciation, etc) = $1.50/gal
• Need a cost of $4.50 to convince people to get rid of old inefficient cars
• Average = $3.75
Future Cost Tax Example
• People consider one half of future costs• Benchmark: 150,000 miles, 40 mpg, $30,000
– Societal cost = $44,060; “sting” = $37,000
• Reference: 100,000 miles, 25 mpg, $20,000– Societal cost = $52,500; “sting” = $36,250
• Tax each vehicle to equalize gasoline sting and societal cost in each vehicle’s life
• Tax short-lived representing future purchase cost of that same vehicle
Other Markets
• Don’t pay electric bills for each appliance– Don’t know efficiency– Electric bill not more visible than depreciation
• “Simple” energy and purchase cost taxes• Subsidy for products longer lived than
benchmark– Saved benchmark purchases– Saved energy if more efficient than benchmark
Benchmark
• Industry can make a roadmap, so taxes don’t have to be adjusted every time the benchmark changes
• The roadmap can be adjusted periodically
• Companies have a clear incentive to do better than the benchmark
Reducing Income Taxes
• Estimate, then statistically determine tax paid by each income group, and business size
• Reduce withholding tax simultaneously with tax introduction
• Taxes will be phased in to allow industry and consumers to respond
Worker Retraining
• Campaign finance reform required
• Industry estimates required incentives for: workers retrained = workers laid off
• Penalties for erroneous estimates
• Funded by benefiting industries?
How Much Saved?
• NRDC studied possible saved energy for cost-effective technologies
• Capital mobility
• Assumed constant cost of efficient products
• 32% reduction in energy use compared to reference case
• $1.8 trillion saved in 40 years!
How Much Taxes?
• $2.6 trillion on energy per year• Tax so that if the taxes were avoided,
everyone would use the best technology• Some taxes even on benchmarks• Lag in industry and individuals => might
pay 1/3 of avoidable taxes• ~ $400 billion per year ~ ¼ current gov’t
spending• Greater because of future purchase taxes
Implications
• ~ 30% reduced energy consumption
• Lower resource use
• ~ $1.8 trillion saved
• Reduced income and capital gains taxes– Poor won’t pay any => less collection costs
• Reduced trade deficit
Acknowledgements
• Joe Geddes
• Dr. Lakhtakia
• Andy Lau
• John Wheatley
• Dr. Nelson
Questions?