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#102 - What We Must Do -- Part 9; It's Time For A Tax On Toxics, 06-Nov-1988

Since World War II the synthetic organic chemicals industry has grown
at a steady 6.5% per year, doubling its total output every 11 years.

During the past 35 years, since 1950, the industry has grown by a
factor of 10, from an annual output of 50 billion pounds to an annual
output of 500 billion pounds. During that same period, the industry has
been responsible for the creation of some 20,000 Superfund sites that
we know of, and countless other dumps that have not yet come to light
as problems. (Some officials within EPA guess that there may actually
be as many as 200,000 places in America where toxics have been buried.)
Although Congress has allocated upwards of $10 billion for cleanup of
old dumps, no one pretends that this is sufficient to do the job. It
may clean up the first 1000 sites, though even this is doubtful. Before
it is over, cleanup will cost hundreds of billions of dollars if,
indeed, it can be done at all. Furthermore, we are still creating new
Superfund sites each year. These are pits, ponds, lagoons and landfills
allowed under the Resource Conservation and Recovery Act (RCRA)
subtitles C and D (which legalize chemical landfills and municipal
solid waste landfills).

In an attempt to control the problem during the past 25 years, we have
passed 10 major pollution laws and have published 8,000 pages of
regulations in the Federal Register. We are currently spending about
$10 million annually for each page of regulations (total: $80 billion
per year spent on end-of-pipe pollution control).

Unfortunately, it will be obvious to anyone who thinks about it that we
are losing the battle. The earth's protective ozone layer is
disappearing, the planet is heating up, the world's oceans are turning
into sewers, acid rain is killing lakes and forests, the nation's
groundwater is becoming unsafe to drink, half the planet's living
species will become extinct in the next 50 years. This is only a
partial list. The catalog of horrors is growing year by year. Only a
few captains of industry and their indentured savants will argue that
our present course makes any sense.

To the technical experts who are wrapped up in maintaining their
credibility and impressing their peers with their analytic detachment,
the situation seems paralyzingly complex. But to the general public,
the situation has become rather clear: with the chemical industry
doubling in size every 11 years, we are saturating the air, water and
soil with toxic contaminants, and each year the situation grows worse.
An old adage recommends, "Don't shit where you eat," but that's exactly
what we've been doing. If asked, most people would agree, it is time
for new departures.

There are at least three new approaches that we can try. One is to ban
certain toxic materials entirely. A second is to ban the mining of
certain materials (for example, lead and cadmium), thus requiring
recycle of existing stocks because new stocks will no longer be legally
available. A third is to tax toxics.

Today we'll examine taxes on toxics. In the past when this approach has
been suggested, it has been attacked as a "license to pollute."
However, in the past the toxics tax has been suggested as an
alternative to the current regulatory system. We, on the other hand,
are not suggesting that the nation abandon any of its existing
pollution control programs. We merely suggest toxics taxes in addition
to all existing pollution control programs.

We favor two taxes: one on the discharge of toxics into the
environment, and another on the use of toxics in products that will,
themselves, eventually be discarded into the environment. Let's look at
the two taxes separately.

The toxics discharge tax is fairly simple. A tax rate is set on each
pound of toxics discharged into the environment. A pound of cyanide
might be $1.00; a pound of sulfur might be 30 cents. The dischargers
would have responsibility for measuring their own discharges, filing
tax returns, computing the tax, and mailing a check. There would be
heavy penalties, including stiff jail terms, for cheating.

The discharge tax would apply to anyone discharging toxics into the
environment, not just chemical firms. Anyone, including manufacturers,
users, government agencies and waste haulers, would pay for the
privilege of degrading the earth's air, water or soil if they chose to
discharge toxic materials in any form.

This plan has the advantage of causing the Internal Revenue Service--
the pit bulls of government--to care about the quantities of toxics
entering the environment. Clearly the EPA does not really care. The
more the EPA knows about toxic discharges, the bigger and more
difficult its job becomes; so for 15 years the EPA has consistently
underestimated the size of the toxics problem, and other agencies (the
Office of Management and Budget and the Congressional Office of
Technology Assessment) have repeatedly had to embarrass the EPA into
revising its numbers upward. The EPA is not enthusiastic about
measuring contaminants because the numbers reveal the agency's
continuing failure to stem the tide of toxics. Getting the IRS into the
act would rather quickly provide us with more reliable facts on the
amounts of toxics being used by industry because the IRS would collect
a tax for each pound measured. The IRS enjoys collecting taxes.

The discharge tax has other advantages as well. It gives industry a
continuing incentive to reduce its use of toxics. When today's
regulations have been met, industry can relax. But with a tax on
toxics, industry would be reminded every April 15 that they are
throwing away profits by discharging toxics. This is a message industry
will hear and will respond to.

The third advantage of the toxics tax is that it provides revenue. The
government could use this money (a) to enforce the toxics tax, doing
spot checks on industry to catch cheaters; and (b) to do the necessary
research to establish a rational basis for the second tax--the tax on
commercial products which contain toxics that will harm the environment
when the products are discarded. (Even with maximum recycling, all
items will eventually be discarded, so we should tax items that will
eventually degrade the environment, creating an incentive for those
products to disappear from our markets.) Research will be needed to
decide what chemical compounds in what commercial products are worthy
of a tax. The program can begin with the obvious ones: plastics can be
taxed. Any item that contains lead, cadmium, arsenic or mercury can be
taxed. As time passes and our understanding improves, new products can
be taxed.

Such taxes should be instituted at the federal level, but they could
also be imposed by states, or even by counties and municipalities
having taxing authority.

Both taxes can be adjusted up or down as we see results. We note that
industry does not favor this approach. They know it would work; it
would force new ways of doing business and even new ways of thinking.
We've got little to lose by giving it a try. It couldn't be less
effective than what we've got now.

The discharge tax has been discussed in several books; one of the best
is Allen Kneese and Charles Schultze, POLLUTION, PRICES AND PUBLIC
POLICY (Washington, DC: Brookings Institution, 1975).

--Peter Montague

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Descriptor terms: taxation; regulation; discharge tax; pollution tax;
chemical industry statistics; growth; global environmental problems;
irs; epa; superfund;