Environmental tax in the US

Environmental taxes in the United States are like virtue: much discussed but little practiced. The current
level of environmental taxation in the United States is very low, relative either to environmental
taxation in other developed countries or to the levels that would efficiently correct major pollution
externalities

By far the largest existing environmental tax in the United States is the motor fuels excise tax: state and
federal taxes on motor fuels accounted for approximately $70 billion in 2005, which was roughly 94
percent of all US environmental tax revenue. The remainder comes from a variety of much smaller
taxes. Although some of these are intended to provide incentives, most are designed simply to raise
money to remediate environmental problems.

Environmental tax revenue as a share of gross domestic product (GDP) was lower for the United States
than for all but one other country (Mexico), and was far less than the average (US environmental tax
revenue was 0.9 percent of GDP, compared with 2.23 percent for the average OECD (Organization for
Economic Co-operation and Development) country)

Looking at environmental tax revenue relative to total tax revenue yields a similar picture: the United
States had the lowest figures of all countries in the sample. Using more recent data would, if anything,
strengthen that pattern: the United States has not imposed any substantial new federal environmental
taxes, and the tax rate for the biggest environmental tax in the United States—the motor fuels excise tax
—has remained constant in nominal terms per gallon since 1993, thus falling in real terms. An
alternative comparison would be to the level of environmental taxation that would efficiently correct
major environmental externalities.

Environmental Tax in European Union

Overall, the current strategic policy focus in the EU is directed towards growth, competitiveness and
jobs and the Europe 2020 strategy aims for the EU to become a smart, sustainable and inclusive
economy. Political realities, as well as the results of theoretical modelling frameworks, reveal that
market-based instruments for environmental policy are enabling factors in achieving these economic
and social objectives.

Trading schemes, for example, can help achieve these objectives in a cost-effective manner.
Furthermore, environmental taxes can help countries to increase their overall tax take and reduce debt
and borrowing, releasing countries from the need to increase other taxes, such as income taxes or
corporate taxes.

Environmental tax revenue at the EU-28 level grew more slowly than gross domestic product (GDP)
between 2002 and 2014, increasing by 9.5 % in real terms (an average increase of 0.8 % annually)
compared to GDP growth of 13.9 % (an average increase of 1.1 % per year). This trend reversed for the
period 2009–2014 as environmental tax revenues increased in real terms by 9.4 % and GDP by 5 %.
There are striking differences between EU Member States in terms of environmental tax revenues —
some

EU Member States increased their environmental tax take considerably in real terms, as well as in the
ratio of environmental tax revenues to GDP. For example, between 2002 and 2014, this ratio increased
in Greece from 2.24 % to 3.68 %, in Estonia from 1.99 % to 2.67 %, and in Slovenia from 3.19 % to 3.89
%. Over the same period, the ratio dropped from 2.81 % to 1.7 % in Lithuania, and from 2.16 % to 1.79 %
in Slovakia. The ratio also dropped in the often-quoted 1990s forerunner European countries, for
example, in Denmark, from 5 % to 4.08 %; Sweden, from 2.74 % to 2.21 %; and Norway, from 3.24 % to
2.31 %.