Question

Which of the following is an advantage of environmental taxes?

Group of answer choices
a.It is difficult to determine what the optimal tax amounts should be.
b.Polluters can absorb low taxes into their costs.
c.They harm businesses looking to develop environmentally.
d.Low-income groups may be penalized.
e.They can be easily implemented by existing tax agencies.

Answer 1

One advantage of environmental taxes is that firms that can reduce pollution cheaply and easily will do so to minimize their pollution taxes. The pollution tax also eliminates favoritism and loopholes for politically well-connected producers. Carbon taxes are an example of a pollution tax.

Step-by-step explanation:

One advantage of environmental taxes is that firms that can reduce pollution cheaply and easily will do so to minimize their pollution taxes, while firms that will incur high costs for reducing pollution will end up paying the pollution tax instead. This creates an incentive for companies to find the least expensive technologies for reducing pollution. Another advantage is that if the pollution tax applies to every source of pollution, there are no special favoritism or loopholes for politically well-connected producers. A global example of a pollution tax is carbon taxes that directly tax carbon dioxide.