Green Taxes: The Importance of Water Consumption Taxes for a Sustainable Economy, Papers of Introduction to Public Administration

Download Green Taxes: The Importance of Water Consumption Taxes for a Sustainable Economy and more Papers Introduction to Public Administration in PDF only on Docsity! Amanda D. Davis PA 395: Green Taxes Gary Flomenhoft September 21, 2004 The fact that Green taxes are all interconnected replicates how all of the ecosystem’s services are interconnected; therefore a holistic approach is necessary in ecological economics and the push towards a tax shift. Resource consumption is one of the greatest subsections of Green tax types (some of the other major subsections include Carbon tax, Pollution tax, and Land Value tax). Of resource consumption taxes, perhaps one of most importance and of most urgency is water consumption. Consumption of water is not the only concern. Quality is of equal importance; as an infinite amount of contaminated water is just as futile as a minute amount of uncontaminated water (at least from an anthropocentric viewpoint). Perhaps it is because we are surrounded by great bodies of water that we forget water is actually a scarce and finite resource. Water consumption taxes are more uncommon than water quality taxes which encompass discharge fees, pesticide and fertilizer taxes, and motor fuel taxes (as these are the main sources of contaminated runoff in our drinking water). Negative effects from contaminated drinking water are undeniably present: cancer, birth defects, and other serious illnesses are on the rise, particularly near extremely contaminated water sources. The realism of running out of water however seems less tangible (unless you live in arid conditions where drought is frequent). What is a water consumption tax? The concept of the “user/polluter” pays principle is setting a trend towards charging consumers for the consumption of natural resources (fossil fuels, minerals, timber, and water). Currently in America, water acts as a free resource. In most places where a consumption tax exists the tax is relatively small and does not greatly affect consumers, other than irrigators (who use 81% of the water consumed in the US). For example, Durning and Bauman (1998) estimated that a tax of $0.06 per 1000 gallons of water used would have generated more than $600 million in 1995 assuming a 15% reduction in consumption due to higher water prices. This would 1 have been enough to cause irrigators to adjust and improve cropping habits. However, it would only result in about six one-thousandths of a cent increase on food (Durning and Bauman 66-67). It is seemingly ridiculous that this tax does not exist. Taxes on the consumption of natural resources would steer people to being more efficient and conservative in their consumption, and would encourage recycling, reuse, and innovation. Consumption taxes would have to be accompanied with strictly enforced regulations and compensation for the poor. Over time the benefits of consumption taxes would be a cleaner environment for all, but in the meantime such taxes may appear to disproportionately affect those who do not have the ability to pay. Below is a chart of how the city of Milwaukee taxes water consumption through a municipal service bill. Water Consumption Milwaukee Suburbs First 100 CCF $1.18 $1.475 Next 4900 CCF $1.09 $1.363 Next 15000 CCF $0.68 $0.85 Next 20000 CCF $0.63 $0.788 Water is measured in one hundred cubic feet (CCF) which is equal to 748 gallons. Notice the trend that the more water consumed, the cheaper the levy. This is clearly perverse. Such a pattern is common in locations where water consumption taxes exist and such models are described as descending block structures. London is another example where charges for residential water consumption decreased as more water was consumed. In 1991, London’s billing changed to an increasing block rate structure. The first 1200 cubic feet is now charged at $2.01 per 100 cubic feet. The next 2800 cubic feet is charged at $2.12 per 100 cubic feet, and it continues to incrementally increase. Denmark serves as one of the world’s chief role models in an environmental tax shift. An analysis between 1989 and 2001 shows “a clear link between rising water prices and reduced water consumption…In this time water consumption in Danish households went 2