States with environmental funding stretched thin are increasingly turning to environmental taxes to protect their natural resources while generating revenue.

In years past environmental protection was largely enforced through regulations that set baseline standards of environmental quality. As power devolves from the federal government, states are looking for new ways that accomplish the dual goals of stimulating economic growth while protecting the environment.

"In 1970 environmentally motivated tax provisions were virtually unknown at the state level," notes Andrew Hoerner of the Center for a Sustainable Economy. "Today only five states have fewer than five such provisions and 21 states have 10 or more." Hoerner’s white paper, Harnessing the Tax Code for Environmental Protection: A Survey of State Initiatives, outlines various mechanisms states have in place to protect the environment.

Severance taxes, which charge those extracting resources, have provided a steady income for states which have heavy concentrations of coal, oil or minerals.

"Montana’s coal severance tax serves as a solid source of revenue for us," commented Montana state Representative Emily Swanson (FF `95). "Fifty percent of the tax goes toward a permanent fund which has reached $600 million. The permanent fund finances infrastructure projects and interest earned is earmarked for the general fund."

Similarly, Connecticut’s oyster tax has bolstered the local shellfish economy while helping ensure the replenishment of a natural resource on which parts of the state are economically dependent. Connecticut imposes a seed oyster tax on the retail value of oysters harvested from state shellfish grounds. The tax provides funds to continue seeding oyster beds, which helps sustain the oyster population and strengthens Connecticut’s fishing industry.

Businesses also stand to benefit from environmental taxes. Some states rely more heavily on pollution taxes than income taxes, for example; businesses there can save money by tightly controlling their polluting emissions and paying lower income taxes on their profits.