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Green tax measures work, they're popular, and states are using them more and more In the aftermath of the orgy of anti-tax, anti-government rhetoric that rolled new leadership into Congress [...]

Tax policy makers need to consider the effects of tax policy on the environment. Rather than looking at the issue of taxing bioremediation costs in an manner that encourages clean-up, tax laws should encourage the prevention of pollution. Giving tax breaks for the purchase of pollution-preventing equipment could save money and be better for the environment in the long run. Different approaches to tax policy and the environment are discussed.

An energy tax based on British thermal units of heat content would not seriously damage the international competitiveness of American industries. Exaggerated claims are being made about the competitive damage by industries seeking additional tax exemptions. Domestic competition, international competition, energy prices and other industrial prices would not be greatly affected. Cost increases in industries would range from .1% to 2%.

More than 5,000 economists attended the Allied Social Science Associations meeting which lasted from Jan 5 to Jan 7, 1993 at Anaheim, CA. Four tax economists agreed that Bill Clinton will need to raise taxes to cut the deficit. The four were Alan Auerbach, Dale Jorgenson, Richard Musgrave and John Shoven. Other topics covered included progressivity, tax exempt debt, marginal rates, increased government spending, infrastructure investment, productivity and the marriage tax.

An incremental investment tax credit cannot be all three of the qualities of fair, effective and cheap, but it could combine any two of them. Four areas to address include definition of base, definition of eligible investments, definition of base for a new firm and control of leasing. A tax that would be cheap and effective would use the ratio of depreciation to sales to define base and use high investment ratios such as 10% or more.

The National Bureau of Economic Research held its Conference on Tax Policy and the Economy on Nov 17, 1992 and considered the effects of tax expenditures. The research and development credit was praised by Bronwyn Hall as more effective than assumed, while Leslie Papke criticized enterprise zones. B. Douglas Bernheim supported tax incentives for saving such as incremental individual retirement accounts.

Pollution taxes have gradually increased in the past 20 years, with three historical phases. Accidental environmentalism marked the first phase until 1986, exemplified by gasoline taxes. Environmental finance marked the second phase beginning with the Superfund Revenue Act in 1986. True pollution taxes mark the third phase beginning with the tax on ozone harming chemicals in 1990. This third phase continues with the move for carbon taxes.

The Federation of Tax Administrators (FTA) supported national uniformity in motor fuels taxation by states at its Nov 1992 conference. Members of the Federal Highway Administration spoke to the FTA about federal tax enforcement for motor fuels and colorization of untaxed fuels. John Love of the IRS spoke about the telephone validation system for excise taxes, and Tim Leighton of the National Association of Truck Stop Operators spoke in support of tax enforcement.

Presidential candidate Bill Clinton's tax proposals center upon rate structure changes and improving collection from foreign companies, but his plan includes other features aimed at fairness. Also included are a capital gains tax cut, a targeted investment credit, tax increases for the wealthy and tax credits for the middle and lower classes. A chart shows the specific tax proposals of all three presidential candidates.

Whether the tax law changes of the 1980s have increased income inequality is a topic of increasing concern among economists. The Congressional Budget Office maintains that the tax burden has remained quite stable in spite of all the tax law changes. Joel Slemrod of the Office of Tax Policy Research at the University of Michigan feels that there is no high-income Laffer curve and that rich people's increased income during the 1980s should be ascribed to factors other than the tax code. Lynn Karoly of the Rand Corp feels that increased income inequality is due to increasingly dispersed wage spread.

The Senate Finance Committee is considering an administration proposal to expand urban enterprise zones. Jack Kemp told the committee that he wants zones to cover the US, and Fred Goldberg said the proposal would raise the total from 50 zones up to 150. Lloyd Bentsen doubted that the proposal would cost only an extra $500 million, and intends to introduce his own bill.

The House Committee on Ways and Means passed the Comprehensive National Energy Strategy Act with favorable results for the oil and gas industry. Provisions requiring purchasers and importers to contribute to the Strategic Petroleum Reserve were dropped, and intangible costs of independent drilling were excluded from the alternative minimum tax. Three Halon chemicals were excluded from the tax for ozone depletion, and qualified trust funds for nuclear decommissioning had their tax rates reduced.

States are increasing their enforcement of income taxation, with a resulting emphasis on multistate incomes for nonresidents or former residents. The Federation of Tax Administrators now has a Task Force on Nonresident Income Issues, especially dealing with two areas. One area is nonresident pensions, and the other is travelling entertainers and athletes. Many states now have reciprocal residence agreements in which all income can be taxed in one state.

There is a need for passive loss relief for real estate rental activity. The Bush administration proposed a measure which was limited by a ten percent ownership rule, which would have omitted many cases and not stimulated construction. Congress responded by expanding the proposal and making losses deductible for 80% of income, which would have allowed too many people to zero out income. A better approach would be indexing interest deductions.

The American Council for Capital Formation held a conference on Mar 10, 1992 titled 'Tools for American Workers: The Role of Machinery and Equipment in Economic Growth.' Bradford DeLong from Harvard University presented research that showed equipment investment as the most determining feature of economic growth. Senator John Danforth spoke about the tax bills in Congress and criticized the Democrats' tax plan, while many economists spoke in favor of investment tax credits.

Capital gains taxation is not done correctly. The history of the tax begins in 1913 and goes through variations that can be roughly divided into four periods: initial stability, recapture, supply side and the present. Debate ranges on five issues: what is a proper tax base, whether capital gains are over-taxed or under-taxed, the encouragement of economic growth, vertical equity among social classes and the raising of revenue.

There are four proposals to change the capital gains tax. Senator Dale Bumpers favors a targeted approach that narrows the range of assets the tax would cover. Senator William Roth favors an incremental investment tax credit, which would limit the incentive to extra investment by a firm rather than limit all its investment. President Bush favors an investment tax allowance for additional depreciation of property. Another Bush proposal is for mark-to-market accounting for securities inventories.

The Committee for a Responsible Federal Budget met on Jan 24-25, 1992 to discuss what actions Congress should take with the 1993 budget. There was significant support for a small tax bill, limited government spending and economic growth incentives, but deficit spending was considered likely because of the election year and limited funds from defense cuts.