The Case for Environmental Tax Shifting: The Polluter Pays Principle
		s economists have long known, we use less of what is taxed and more of what is not. The "polluter pays principle" means that the industry or individual adversely impacting the environment pays the costs of reversing that damage. It is a market approach to environmental protection and works to complement traditional government regulation. The costs of mitigation are internalized by the industry sector causing the damage, ultimately encouraging prevention through marketplace.45, 46 The cost of chemical use to the environment and human health has not been borne by agriculture. "The real costs ... whether that is nutrient enrichment and fish declines in the Gulf of Mexico from fertilizer runoff, or bird declines due to pesticide use" are not paid by the system.47 "As far as environmental policy is concerned, U.S. agriculture has been something of anomaly. While most industrial sectors have experienced a succession of environmental policy approaches, the basic policy toward agriculture has changed little since the 1930s. Farms and ranches have been exempt from most of the regulations governing water, air, and land use that apply to other sectors." —David Ervin et al, 1998.48   The Fair Agri-Chemical Tax (FACT) Campaign — a nationwide alliance of state farm, consumer, and environmental groups - advocates for the repeal of states' sales tax exemptions for agricultural chemicals. Farmers would pay more of their fair share to address the environmental and health impacts associated with the use of agri-chemicals. Although considered conservative by some agricultural economists who propose the use of taxes to cover the costs of environmental mitigation in agriculture, eliminating sales tax exemptions for agri-chemicals is a step in the right direction.49 Because sales taxes are a minor portion of the overall costs of producing goods, the price impact on the producer, the user, and the consumer is likely to be minimal. In addition to eliminating an incentive to use agricultural chemicals, sales taxes can generate substantial revenue that could be used to fund important new areas of environmental monitoring, research, and technical assistance in the use of alternatives to the hazardous chemicals, as well as for conservation easements and mitigation. Taxes based on sales do not distinguish between more or less hazardous materials but are simple to collect.50, 51, 52, 53, 54 Most Americans would actually support increased charges. An opinion poll conducted by the Center for Science in the Public Interest (CSPI) in 1995 found that 76 % of Americans support levying a small charge on agricultural uses of pesticides to fund sustainable agriculture. Eighty-six percent think federal and state agencies should teach farmers to use fewer pesticides.55 A separate 1998 survey of registered voters found that 64 % favored pollution taxes and 72 % favored the restructuring of economic policies that harm the environment.56 Some states have already taken small steps toward implementing a policy of using taxes to fund programs promoting sustainable agriculture. California, Minnesota, and Iowa have each adopted nominal pesticide taxes (0.3 - 1.5 % of sales) and are directing some of those funds towards grant programs that encourage more research and the adoption of sustainable practices. Most states charge at least a nominal fee per ton of synthetic fertilizer to pay the cost of monitoring its use, and some states also use these funds for educational programs. A number of European countries have implemented — or are considering — larger taxes of up to 30 % to fund education and research and to actively discourage the use of agricultural chemicals.57, 58   Documenting Sales Tax Exemptions, Sales Tax Rates, and Sales of Agricultural Chemicals Currently, twenty-nine state governments exempt agricultural chemicals from sales taxes losing nearly $700 million in uncollected revenue. The exemptions, thereby implicitly encourage chemically-intensive agriculture while putting alternatives like organic growing at a competitive disadvantage due to the need, for instance, to pay for more labor-intensive weed control instead of relying on herbicides.59 These exemptions are unfair to the other industries that are paying for the costs associated with their environmental and health impacts, to the people who are experiencing the health consequences of agri-chemicals, and to the taxpayer ultimately footing the bill for environmental clean-up. Building on the ‘polluter pays' principle taxing agri-chemical use is clearly one of the simplest mechanisms to fund the transition to more environmentally-friendly methods of farming.   CONTINUE TO: < < PREVIOUS Page NEXT Page > >     [  Back to Top  ]   Home  |  Credits  |  Table of Contents  |  Footnotes  |  State Profiles  |  Contact