Chapter 16: Regulatory taxation
Jiirgen G. Backhaus' Introduction This entry serves to emphasize the difference between three distinct types of taxation: classical or traditional taxes serve to generate revenues with a minimum excess burden or welfare loss; regulatory taxes, on the other hand, can be of two kinds. Pigouvian taxes are regulatory taxes in the sense of accomplishing slight changes in individual or firm behaviour; the production or consumption functions are assumed as given. The point of environmental taxation and of designing an environmentally sound tax system, on the other hand, is to accomplish deep and structural changes in the economic and ecological behaviour of individuals, households and firms, that is changes of patterns and not changes of degree. When these basic patterns of behaviour and processes are to be influenced, it is important to identify those basic aspects that are environmentally and ecologically important and susceptible to change as a consequence of a tax intervention. Consequently, one has to identify those instances where basic choices can be taken and where decision makers face alternatives among which they can choose. Generally speaking, environmental taxes of this kind belong to a type of regulatory taxes that is not only designed to affect choices within structures and constraints but choices about such structures and constraints. Since Pigouvian taxes, the first type of regulatory taxes, are well documented in the literature, the emphasis here is on the other type of regulatory taxes which aim at structural change. Throughout, this is done with reference to environmental regulatory taxes....
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