‘No taxation without hypothecation’: towards an improved understanding of the acceptability of an environmental tax reform

Abstract

Although it is widely acknowledged that taxation is a powerful instrument for combating environmental problems, environmental taxation is still underused. Public acceptability of regulatory taxes appears to be low, to the extent that a trade-off between the acceptability and the efficiency of policy instruments can be observed. This paper examines the determinants and conditions for public support and willingness to pay for environmental taxation, based on survey data of 1308 citizens. The results show that education and environmental awareness are determinants for support, and that initial low support can be significantly improved by earmarking the tax revenues to the environment. Other ways of revenue recycling, such as an environmental tax reform, can be ranked based on acceptability. We call this ranking the 'Ladder of Acceptability of Revenue Recycling Options' (LARRO). Well-chosen design options for the environmental tax reform can further improve its acceptability.

Citizens' Willingness to Support New Taxes for COVID‐19 Measures and the Role of Trust

“…As a consequence, policies and actions imposing a larger individual burden are likely to receive less support (Hammar and Jagers 2006; Lubell, Zahran, and Vedlitz 2007). Support for tax policies, in particular, have been found to be influenced by earmarking, or “hypothecation,” which highlights the potential role of targeted revenue allocation in increasing support for things like national insurance contributions (e.g., unemployment insurance), road tolls (Wilkinson 1994), and environmental taxes (Bachus, Van Ootegem, and Verhofstadt 2019; Kallbekken and Aasen 2010; Lachapelle, Borick, and Rabe 2012). A number of other individual‐level factors have further been identified as important for explaining citizens' tax policy preferences.…”

Empirical Research of Public Acceptance on Environmental Tax: A Systematic Literature Review

“…However, the Norwegian respondents have seemingly more trust in the government that they support implementing environmental taxes [62]. Bachus et al [75] found that the public is willing to pay more when they think that the government is not doing enough to protect the environment; however, their willingness to pay lowers when the government is doing too much to protect the environment. While people in higher levels of Quality of Government (QoG), which refers to the state capacity to perform its activities in an efficient, fair, and impartial manner, and without corruption, are associated with more robust support for environmental taxes compared to those who live in the lower level of QoG [33].…”

Lowering the Consumption of Animal Products without Sacrificing Consumer Freedom – A Pragmatic Proposal

“…Most of the relevant literature in the fields of public economics and behavioural and political science takes carbon taxation as the core policy instrument and analyzes the public acceptance of different ways of spending the tax revenue (Carattini et al, 2018;Klenert et al, 2018;Raymond, 2019;Beiser-McGrath and Bernauer, 2019;Maestre-Andrés et al, 2019;Bachus et al, 2019). All these studies support the claim that the "recycling" of revenues can increase public acceptance of carbon taxes.…”

“…Regarding the optimal scheme for the recycling of tax revenues, there is no clear evidence, suggesting that the design of a particular spending scheme depends on particular political circumstances (c.f. Klenert et al, 2018;7 Diepeveen et al (2013); Drews and van den Bergh (2015); Carattini et al (2018); Bachus et al (2019); Fesenfeld et al (2020). 8 Diepeveen et al (2013) reviewed health related policy interventions (alcohol, tobacco, diet, and physical activities).…”