The demand for earmarking: Results from a focus group study

Environmental taxes might be efficient, but plans to impose new taxes are often met with fierce public resistance. In order to design environmental taxes that are both efficient and acceptable to the public - so that they can be politically feasible - it is important to understand public attitudes towards environmental taxes. We conduct a focus group study in Norway to extend the current knowledge on this issue. We find less general resistance to taxation as a policy instrument, and seemingly more trust in government, than what has been reported in similar studies from other countries. The participants are, however, very skeptical and do not see the point of using the revenues from an environmental tax to reduce other taxes, such as the payroll tax. Instead they express a very strong preference for earmarking the revenues for environmental purposes. They also call for more information about environmental taxes, in particular on how the revenues are spent. Providing more information, including what the revenues are spent on - irrespective of whether they are earmarked or not, would seem to provide a relatively cheap and possibly effective way to increase the public acceptability of new or increased environmental taxes.