Friday, December 9, 2022
Weekly SSRN Tax Article Review And Roundup: Roberts Reviews Mann's Targeting Plastic Pollution With Taxes
This week, Tracey Roberts (Cumberland; Google Scholar) reviews Roberta Mann (Oregon), Targeting Plastic Pollution with Taxes, 37 J. Land Use & Envtl. L. __ (2022).
In the 1967 film, The Graduate, Benjamin Braddock has just finished college and, having returned to his parents' Pasadena home, he is trying to avoid the one question everyone keeps asking: "What are you going to do with your life?" One of his father’s business partners, Mr. McGuire, pulls Ben aside to make a recommendation: "I just want to say one word to you. Just one word. ... Are you listening?... Plastics.... There's a great future in plastics. Think about it. Will you think about it?... Enough said. That's a deal."
It’s a deal Americans took and ran with. Since the 1970s, plastics have come to define our way of life. Plastic seemed to be the ideal substance; it is strong, light-weight, durable, and cheap. Now, decades later, we realize that durability has a cost that belies the adjective “cheap.”
Plastics persist. Most take over five hundred years to decompose. They don't break down; they break into tiny pieces. Plastics enter our environment at every stage of their lifecycle: extraction and transport, refining and manufacture, consumer use and disposal. We breathe them in. We ingest them. We absorb them through our skin. Plastics, and the chemicals added to them, are toxic to our brain, nerves, heart, lungs, liver, kidneys, and reproductive organs. They cause a broad array of cancers and disorders of our nervous, respiratory, cardio-vascular, digestive, renal, endocrine, immune, and reproductive systems. They are teratogenic and embryotoxic, causing fetal abnormalities and death. In her new article, Targeting Plastic Pollution with Taxes, Professor Roberta Mann outlines the latest research on the impacts of plastics to our health and the environment, the history of tax and other subsidies to the oil and gas industry in the U.S, and current global efforts to address plastics pollution, highlighting the key role taxation may play in curbing these harms.
Mann explains that oil and natural gas are essential feedstocks for all but one percent of plastics and that these industries have enjoyed extraordinary federal support, despite known long-term hazards. They receive exemptions from federal environmental regulations. They have enjoyed lucrative incursions into pristine wilderness and wildlife areas. They received disproportionate support during the pandemic through the federal budget process and under the CARES Act. They have also enjoyed special tax subsidies for over one hundred years. Currently, the major tax subsidies include percentage depletion, deduction of intangible drilling costs, and enhanced oil recovery credits. While the industry benefits from having their interests traded on public markets, these interests escape corporate taxation, being classified as interests in publicly traded partnerships that receive income from production, processing, transportation, storage, and marketing of oil and gas resources. All of these tax benefits are permanent. They will remain part of the tax system until Congress actively repeals them. In contrast, tax supports for renewable energy alternatives are temporary and limited. They take the form of tax credits, which have less value when tax rates are low and when taxable income declines (as occurred during the recession and the pandemic). Nevertheless, fossil fuels have even managed to grab their own share of tax credits for carbon capture and storage. Unlimited tax credits are available to the oil and gas industry for reusing carbon dioxide in the oil extraction process (enhanced oil recovery) and by injecting compressed liquid carbon dioxide into deep geological rock formations. Congress has picked its winners and losers. Fossil fuels get the Cadillac; renewables get the Gremlin.
It’s long past the date when the oil and gas industry needed federal support. However, to date efforts to end these subsidies have only met with failure. Their lobbying arm is vast and effective, especially following the U.S. Supreme Court’s decision in Citizens United v. Federal Elections Commission, which recharacterized campaign donations as protected political speech, reversing campaign finance restrictions that had been in place for over a century. Since then, corporations and special interest groups have faced no limits on elections spending. Consequently, we see far more influence with far less transparency. Mann reports that the oil and gas industry has doubled its campaign contributions to legislators. Moreover, the fossil fuel industry’s marketing to promote a largely illusory plastics recycling system is rivaled only by their funding for climate change denial.
Fortunately, as Mann explains, other countries and several U.S. states have begun to act to protect their citizens from plastics pollution. Various forms of carbon pricing have been adopted in countries throughout the world, but in the U.S. political opposition to a carbon tax or other form of carbon pricing has emphasized the economic impact to the broader economy and the need to offset the impacts to middle- and lower-income households. Mann also notes that, for dealing with the particular problem of plastics pollution, carbon taxes may be overbroad. For the past three decades, European countries have adopted “Extended Producer Responsibility” to place financial responsibility for plastic waste on the producer, rather than consumers or the municipalities in which they live. Some locales have implemented deposit and refund systems to encourage collection and recycling of plastic waste. A number of countries in Africa have successfully imposed a tax or placed bans on plastic bags and packaging with serious and significant enforcement penalties. The United Kingdom has combined Extended Producer Responsibility with a plastic packaging tax to encourage the development of packaging that is easier to recycle and reuse. While there has been no U.S. federal response to the plastic problem to date, several states, including Colorado, Louisiana and Kentucky have provided tax credits to encourage individuals and businesses to recycle post-consumer waste and Montana and Virginia have passed business tax credits to support the acquisition of recycling equipment and machinery. Maine and Oregon have recently imposed taxes on plastic packaging.
The most significant impediment to any form of plastic tax or regulation is “leakage;” someone subject to plastic taxes or regulations may avoid them by shifting manufacturing or disposal to another jurisdiction. As of 2018, China has refused to accept plastic waste from the United States. This brought an end to our primary international pathway for avoiding our plastics problem. However, each of the state-level experiments in plastics regulation are fairly easily undermined by shifting the manufacture or shipping the waste to places that don’t regulate. Those places often have democracy deficits. As a result, those who are subject to the worst pollution are the poor, disenfranchised, and minorities, exacerbating existing environmental injustice problems from discriminatory real estate sales, marketing, redlining in the insurance and finance, and race-based restrictions in zoning and private covenants. Consequently, the optimal solution for the U.S. would be a nation-wide plastic tax. Mann notes that in August of 2021 Senator Sheldon Whitehouse proposed just that. The REDUCE Act (Rewarding Efforts to Decrease Unrecycled Contaminants in Ecosystems) would impose an excise tax on virgin plastic resins, which are used primarily for single-use plastics, and the funds would be used to support plastic waste reduction and recycling activities.
Fifty-five years ago this month, The Graduate was released to critical acclaim and commercial success. The film not only augured a shift in the American zeitgeist, but foretold our long, sordid, and damaging romance with plastics. Like Benjamin Braddock, we find our fateful decisions have come back to haunt us. Unlike Hollywood’s film fantasy, however, the world we might have had is no longer available. Nevertheless, we may be able to extract ourselves from this ruinous relationship and salvage something of our future. As Professor Mann has shown, taxation may be the most effective means to do so.
Here’s the rest of this week’s SSRN Tax Roundup:
- Andrew D. Appleby (Stetson) and Tomer Stein (Stetson), Multistate Business Entities, 55:1 Arizona State Law Journal (Forthcoming, 2023)
- Leslie Book (Villanova), Collection Due Process At 25: A Still Important and Needed Check On IRS Collection Power, Pittsburgh Tax Review (Forthcoming 2023)
- Williamson Brandt (Independent), Help Us Help You: 1099s and Virtual Currency, Working Paper Series (Oct. 13 2022)
- David Elkins (Netanya), Embracing Tax Avoidance, Working Paper Series (Dec. 7, 2022)
- W. Ben Hur (Independent), Irregularities in 'The Silent Majority' and the Failure (or Absence) of Editorial, Review, and Ethical Procedures at the Journal of Accounting Research, Working Paper Series (Dec. 7, 2022)
- Jeffery M. Kadet (Washington), The Lessons of Whirlpool, 177 Tax Notes Federal (Oct. 3, 2022)
- Federica Lanterna (Roma Tre) and Paolo Liberati (Roma Tre), On the Use of the Value Added Tax for Redistributive Purposes in Italy (Oct. 12, 2022)
- Sarah B. Lawsky, Coding the Code: Catala and Computationally Accessible Tax Law, 75 SMU L. Rev. 535 (2022)
- Robert W. McGee (Fayetteville State), Jovan Shopovski (European Scientific Institute) and Monika Bolek (Lodz), Factors Influencing Tax Evasion from a Global Perspective in the Light of Gender, 35:3 Journal of Finance and Financial Law 9 (2022)