Decentralization and Environmental Decision Making

Shelby Gerking analyzes the effect of state tax rates on the disposal of chlorinated solvent wastes in the United States. He finds that changes in the disposal costs of these chemicals as a result of increases in state tax rates did not have a significant impact on waste generation and disposal. Between 1988 and 2004, the disposal of chlorinated solvents decreased by 96 percent. For plants included in his study sample, the decreases were 78 percent during the same period. The reasons for the dramatic reduction were twofold: (1) the introduction of aqueous cleaners; and (2) increases in the recycling and reuse of the chemicals. As Gerking admits, these technological changes reduced the use of chlorinated solvents so greatly that it was difficult to identify any separate effect of the state tax rates.

By examining data prior to the technological changes (1988–1990), Gerking found that firm decisions on the generation and disposal of chlorinated solvent wastes also did not respond to changes in state tax rates. Hence, he asserts that assigning to the states greater responsibility for regulating chlorinated solvent wastes had not resulted in inefficiency because waste disposal taxes had no effect on firm behavior.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2007 and is Chapter 7 of the book Fiscal Decentralization and Land Policies.