While we’re on taxes: several counties in Maryland (if your knowledge of American geography is limited, that’s Baltimore and The Wire) will now tax impervious surface cover. That’s rooftops, driveways, decks, etc. The contributions impervious surfaces make to urban heat islands, groundwater depletion, building subsidence, flooding, and water pollution are well understood (the wonkish may want to see Arnold & Gibbons, “Impervious surface coverage: The emergence of a key environmental indicator”). Taxing impervious surfaces is a simple and elegant solution, because there are very often simple, cheap, low-tech fixes (like replacing impervious surfaces with …. pervious ones!, or getting your rooftop exempted from the tax by collecting rainwater in a cistern for garden use): the tax provides an incentive for property owners to go fix these problems themselves.
Now, in honor of UKIP and of the general Brussels phobia that is sweeping Britain and much of the rest of Europe, here’s the connection between this wonderful tax, and federalism: the good people of Maryland did not decide to do this for themselves, either directly or through their elected representatives. Indeed, the tax has quickly been labelled a “rain tax” and so widely ridiculed that all but the most courageous and principled political representatives might be expected to back down. Fortunately, the hands of Maryland’s politicians are tied, because the state has federal water quality commitments to meet. That is not to say that the federal government mandated this particular tax – what it mandated was cleaner water in local rivers and Chesapeake Bay, and left the state to figure out how to accomplish that. Having failed to solve this problem, the state has told each of its counties to find a way to reduce polluted run-off, and to use this new taxing power to pay for the solution. In much the same way, most of the air pollution controls used on cars around in the world (catalytic converters and all that) were developed in response to pollution controls adopted by the state of California starting in the early 1970s; California was acting in response to US federal clear air requirements. California’s legislature, on its own, would almost certainly have lacked the political will to address the problem so decisively; a centralized national government, on its own, might not have found solutions to what was then seen as a California problem.
This same logic – centrally agreed mandates or performance specifications, coupled with decentralized problem solving and implementation – is used in many organizations, both public and private, both to guide new product development and to ensure service quality. The approach is not without its problems – mandates tend to be simple numbers; what gets measured, gets done, while other problems may be ignored – but it is a powerful tool. So let’s lift a glass of clean water to toast regulations from Washington and Brussels, and the powerful incentives they can provide for innovation!