Saturday, May 6, 2017
Tracey M. Roberts (Cumberland) presented Environmental Opportunities in Comprehensive Tax Reform at Columbia yesterday as part of its Fourth Annual Sabin Colloquium on Innovative Environmental Scholarship:
In addition to the many anticipated benefits associated with recent proposals for tax reform such as improved administration, increased saving, and higher growth, there may be one more: environmental protection. This article examines a recent proposal for corporate tax reform, identifies potential environmental benefits associated with that reform and discusses ways that the tax regime may be modified to further environmental goals. The article makes two contributions.
First, the article identifies the environmental benefits of tax reform in and of itself — the elimination of existing subsidies to the fossil fuel industry and other tax expenditures that support electricity generation, transportation, and housing development patterns that have significant adverse environmental impacts.
The article discusses how the preferential treatment of debt under the income tax combined with accelerated depreciation have encouraged businesses to consume and dispose of durable goods at an accelerated rate and how these provisions, combined with exemption from the corporate tax under I.R.C. § 7704, funnel investment toward fossil fuel infrastructure. The article explains how a recently proposed change from the corporate income tax to a business level cash flow tax would eliminate this preference, improving environmental outcomes.
Second, the article describes two unique opportunities available if the United States were to shift from taxing worldwide income to a destination based cash flow tax. A destination-based tax would require the U.S. to impose border taxes on imported goods and provide tax refunds for exports. If this plan survives WTO scrutiny, it will have resolved one of the primary quandaries relating to the implementation of a carbon tax — the use of border taxes to prevent carbon leakage. In addition, for the first time, the U.S. would be in a position to employ a tax system that encourages cradle-to-cradle manufacturing.