Washington State Institute for Public Policy
The Evergreen State College
Seminar 3162, MS: TA-00
Olympia, Washington 98505
(360) 866-6000, ext. 6380
Fax (360) 866-6825

This paper analyzes and evaluates the use of environmental tax policy across the country in two
categories: recycling and water quality. The intention is to provide background information on
environmental tax programs that can be used as a guide for the design and implementation of
environmental tax programs in Washington State. With information from programs in other states,
legislators and agencies can learn from both the positive and negative elements of programs
tested elsewhere.

Income tax credits are the most common tax incentive provided for recycling.
(Many of the features of income tax credits can be adapted for use with
Washington State\u2019s B&O tax system.)

Almost no states follow the \u201cpolluter pays\u201d principle in their efforts to control water
pollution. Taxes and fees tend to be only large enough to cover administrative costs of
educational and cleanup programs. An incentive to change polluting behavior is more
likely to come from the educational programs funded by the tax than from the tax itself.

Programs that are most successful in meeting their goals contain these elements: customer orientation and interagency cooperation, marketing efforts, and technical assistance.

Environmental tax incentive programs that are administered jointly by
environmental agencies and revenue departments tend to be more successful in
meeting goals and less frustrating administratively for the agencies involved.

A. Purpose of Study............................................................................................................1 B. Justification for the use of tax policy to promote environmental goals...................2 C. Research methodology..................................................................................................3 D. Environmental tax policy in Washington State...........................................................5

Appendix A - Case Studies: Recycling.................................................................................. 25 Appendix B - Case Studies: Water Quality............................................................................ 35 Appendix C - Selected Bibliography....................................................................................... 43