Reach More Types of Behavior . By using market-based price signals, green taxes also have the potential to reach some kinds of behavior that it is difficult for regulations to reach. Tax signals can influence everyday marketplace and household decisions that are difficult to regulate, such as our decisions about what products to buy and how much to use, that can generate significant non-point source pollution. These decisions are difficult to regulate because they are made in the course of thousands of daily transactions, but tax signals that pulse through the marketplace can affect these decisions. Spur New Technology .
Green taxes can help advance the development of new technology.
If we tax the old technology, we encourage entrepreneurs to develop new ways of doing business that would not be subject to the tax. Similarly, if we give tax discounts to new technology, we can help consumers over the psychological speed bump of trying new products. Regulations, by comparison, may not be able to effectively mandate new technologies or shape consumer preferences. Reform Other Taxes . When green taxes generate new tax revenues, government has the option of reducing existing tax burdens that may not be fair or may be dampening the economy.