Accounting For Earth Day 2006
It has been 36 years since the first observation of Earth Day in 1970. We did not help ourselves environmentally very well before that time. Industrial and municipal wastes were not handled or disposed of properly, according to the Hawaii Reporter. The Cuyahoga River, running through Cleveland, burned in 1969. Then we started cleaning up after ourselves more, and now we have created an expensive infrastructure to handle the costs of regulatory compliance.
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Some environmentally oriented tax measures have been enacted for good. The Brookings Institution and World Resources Institute report that President George H.W. Bush enacted federal legislation taxing certain ozone-depleting chemicals in 1989 and lowered the use of these chemicals 38 percent in 1990 alone, in addition to raising some $2.9 billion in revenue in its first five years of enforcement. Also, the Superfund tax, in place between 1980 and 1995 and aimed at oil, chemical, and other revenue-generating companies, generated some $20 billion for the cleanup of toxic waste sites.
State tax initiatives have also been enacted to enhance environmental change and protection. Governor Robert Ehrlich of Maryland supported and enacted tax legislation aimed at septic systems and added a surcharge onto sewer bills, dedicated to protecting the Chesapeake Bay, according to the Brookings Institution and World Resources Institute report.
Pollution taxes influence corporate and individual behavior, via prices, and improve economic efficiency and environmental quality simultaneously, according to the Brookings Institution and World Resources Institute report. Environmental taxes are perhaps more effective than environmental regulations because cost-effective measures represent more significant costs to companies and lower societal costs at the same time. They are also flexible, allowing companies to make their own decisions on how to comply. This can initiate technological innovation while generating revenue.
These taxes are better suited for pollution caused by many different sources and where compliance costs differ greatly among the polluting companies, according to the Brookings Institution and World Resources Institute report. Implementation is another factor. Emissions, or emission products that are reasonably easy to measure and monitor, are good targets for pollution taxes.
Complying with environmental regulations is expensive. According to the Hawaii Reporter, the cost of regulatory compliance in this country is estimated at $870 billion yearly, of which more than $205 billion is spent for environmental compliance. Taxes and the environment have surely influenced governmental and corporate decision makers, while the sometimes significant waste of financial resources may be not realized, for the most part.
The Conservative Voice reports that the total cost of complying with the income tax comes to some $125 billion annually, although other estimates reach as high as $194 billion. This is money that will not enter and multiply in the economy. This is not capital investment or money available for our education systems. It is estimated that the waste will escalate to $1 trillion over the next eight years if Congress does not act to reduce the irrational complexity of the tax code in this country. President Jimmy Carter exclaimed back in 1976 that, “Our income tax system is a disgrace to the human race,” and that was before the tax code reached over 60,000 pages, as it does now.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.