Environmental pollution is one of the central issues discussed by professionals in many fields. Economists are also involved in this discussion as they try to react to challenges of the modern business world. Don Fullerton and Sarah E. West explore efficiency of the Pigovian tax imposed on individual cars’ emissions. The researchers stress that the tax is not efficient as it is based on gas emissions mainly. At the same time, the authors develop an ideal Pigovian tax that addresses environmental issues more effectively.
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Notably, many countries have benefited from the use of this type of taxation. Thus, it has been estimated that gas pollutants emissions have decreased by about 6% which can be regarded as a good (though quite modest) result (Alford 127). US taxation associated with gasoline has been a topic of a heated debate lately. Many researchers note that US taxes are inadequate as they do not address all the issues involved.
Notably, the issue has a significant political component as politicians are trying to avoid increasing the tax as this measure is unlikely to be supported by voters (Kolbert). People still prefer driving their cars and the economic constraints make them more sensitive to the increase in any taxes which results in development of a certain public opinion on the matter. Nonetheless, I believe it is more important to focus on the economic component of the issue rather than its political or any other side.
For instance, it is clear that the US gasoline tax does not include all the externalities and focuses on emissions only (Mankiw 19). However, the problem is multifaceted and it needs a more complex approach.
Many economists emphasize that existing federal taxes are too low to be efficient when it comes to addressing environmental issues as fuel consumption does not decrease or becomes more sensible (Turgeon 147). Economists have estimated that the taxes have to be at least 60% higher to become efficient (Harris and Roach 305). Of course, it is not enough simply to raise taxes.
Fullerton and West also support the idea of the increase of the tax through inclusion of such components as gasoline, vehicle age and engine size (2). The researchers state that second-best tax can achieve 71% of the Pegovian tax gain (Fullerton and West 2). More so, the authors claim that tax increase is unlikely to be effective if used separately from subsidies.
This can be an efficient solution as the balance between taxation and subsidizing can encourage people to use their cars in a more sensible way. It is necessary to add that the researchers provide a thorough analysis of the problem and support their ideas by particular calculations that show efficiency of their approach.
In conclusion, it is possible to note that the article in question provides a specific solution to one of the most burning problems existing in the USA and the entire world. The researchers stress that taxation and subsidies that are calculated with the focus on such components as gas, vintage and size can be effective when addressing the problem of gas emissions.
The argument is solid as it is supported by calculations as well as experience of a number of states. Therefore, this approach should be used by economists and politicians who should impose this tax in a number of states. Later, this combination of taxes and subsidies can be used nationwide.
Alford, Krista. “Holding Polluters Responsible: Redistributing Externalities.” BYU Prelaw Review 28.1 (2014): 117-129. Print.
Fullerton, Don and Sarah E. West. “Tax and Subsidy Combinations for the Control of Car Pollution.” The B.E. Journal of Economic Analysis & Policy 10.1 (2010): 1-33. Print.
Harris, Jonathan M. and Brian Roach. Environmental and Natural Resource Economics: A Contemporary Approach. New York: M.E. Sharpe, 2013. Print.
Kolbert, Elizabeth. “Paying for It.” The New Yorker 10 December 2012. Web.
Mankiw, N. Gregory. “Smart Taxes: An Open Invitation to Join the Pigou Club.” Eastern Economic Journal 35.1 (2009): 14-23. Print.
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Turgeon, Evan N. “Triple-Dividends: Toward Pigovian Gasoline Taxation.” Journal of Land, Resources & Environmental Law 30.1 (2009): 145-23. Print.