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Taxes and the Environment: What green taxes does the United States impose?

The United States imposes virtually no green taxes. Most programs to reduce pollution rely on mandatory standards such as the Clean Air Act's New Source Performance Standards (NSPS) for stationary polluters and the Corporate Average Fuel Economy (CAFE) standards for automobiles. Among the few green taxes imposed in the United States at the federal level are the "gas guzzler" tax on new cars that exceed fuel efficiency standards, a tax on ozone-depleting substances, and miscellaneous taxes on fertilizers and pesticides used in agriculture.

  • Numerous taxes and user fees are imposed at the state and local level, including pay-per-bag disposal charges for municipal solid waste and deposit-refund schemes for beverage containers and automobile batteries. In general, such policies tax pollution only indirectly and are too low to affect behavior measurably.
  • Proponents often cite the gasoline tax as a green tax. The federal gasoline tax is currently 18.4 cents a gallon, and state taxes add an average of 20 cents more. Adjusted for inflation, gasoline tax rates have fallen to about half their rates in the 1930s (figure 1). Some economists do not consider the current gasoline tax to be a green tax, even indirectly, because over 80 percent of the revenue is used to subsidize road construction, which ultimately encourages more pollution.
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  • Advocates of increasing the gasoline tax, such as Harvard economist Gregory Mankiw, assert that the higher tax would address both pollution and other costs of driving not borne by the individual driver. These costs have been estimated at over 80 cents a gallon, divided approximately equally among pollution, congestion, and accident risk.
  • In the United States, sales and excise taxes on gasoline make up much less of the total cost of fuel than in other countries (figure 2).

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