Two Generalizations of a Deposit-Refund System

A direct tax is not easy to impose on dumping or litter, so a useful alternative is the deposit-refund system. Two important generalizations of the deposit-refund idea are suggested. In the first generalization, the idea is applied not just to solid waste materials, but to any waste from production...

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Bibliographic Details
Published in:The American economic review 2000-05, Vol.90 (2), p.238-242
Main Authors: Fullerton, Don, Wolverton, Ann
Format: Article
Language:English
Subjects:
Economic theory
Environmental pollution
Environmental tax
Green taxes
Income taxes
Optimal taxation
Pigouvian taxes
Pollutant emissions
Polluter-pays principle
Pollution control
Provinces
Recycling
Revenue
Studies
Subsidies
Tax refunds
Tax subsidies
The Economics of Waste
Waste disposal
Waste management
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Summary:A direct tax is not easy to impose on dumping or litter, so a useful alternative is the deposit-refund system. Two important generalizations of the deposit-refund idea are suggested. In the first generalization, the idea is applied not just to solid waste materials, but to any waste from production or consumption, including waste that may be solid, gaseous or liquid. In the second generalization, the case is considered where government must use distorting taxes on labor and capital incomes. To help meet the revenue requirement, at issue is whether the optimal deposit would be raised and the refund reduced. The second-best-revenue-raising deposit-refund system or two-part instrument to answer that question is derived.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.90.2.238