State Taxes and Interstate Hazardous Waste Shipments


    Hazardous waste has been among the fastest growing components of environmental compliance costs in the U.S., and often tops public opinion polls as the most important environmental problem. In recent years many states have substantially increased the rate at which they tax disposal of hazardous waste, and a few have imposed higher taxes on waste imported from other states. This paper examines the extent to which these state taxes have inhibited interstate transport of hazardous waste for disposal in the United States. It uses panel data from the Toxics Release Inventory (TRI) and the Resource Conservation and Recovery Act (RCRA) on interstate shipments of waste, and analyzes them in conjunction with a set of state characteristics, including hazardous waste disposal taxes and disposal capacity. It employs four approaches to deal with the potential endogeneity of taxes and unobserved heterogeneity among states: a "natural experiment" based on the retaliatory nature of some state tax laws, a fixed-effects model, a two- stage least squares estimator, and a reinterpretation of the coefficient on the distance among states. The paper concludes that hazardous waste taxes are a statistically and economically significant deterrent to interstate waste transport, that taxes are being imposed by large-capacity and large-import states, and that therefore these taxes have had a decentralizing effect on the national pattern of hazardous waste transport and disposal.

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