One in four Americans lives within 3 miles of a hazardous waste site (HWS). To clean up the highly contaminated sites, the Congress established the Superfund program in 1980. EPA has identified more than 47,000 HWS potentially requiring cleanup actions and has placed more than 1,500 of the most seriously contaminated sites on its National Priorities List (NPL). Cleanup efforts at NPL sites are expensive and can take many years. To fund program activities, a trust fund was financed by taxes on crude oil and certain chemicals, as well as an environ. tax assessed on corp. This report examines the: (1) sources of funding for the Superfund trust fund; and (2) allocation of these resources to Superfund program activities. Illustrations.

One of the difficulties associated with Superfund—the federal government's program for cleaning up toxic waste sites in the United States—is the poor understanding we have about who is actually bearing its costs. While it is known that the tax on chemical and petroleum feedstocks raises about $570 million annually for the Superfund Trust Fund and the corporate environmental tax raises another $460 millino each year, further reliable data are only now becoming available. Researchers are beginning to understand how much potentially responsible parties and their insurers are spending on both transaction costs and on-site cleanups. Unfortunately, this is only the first part of the puzzle. Ultimately, these costs are borne by individuals--as consumers of the products or services provided or as share- or bond-holders, employees, or managers of the company. To date, no one has attempted to estimate the distribution of initial costs under the Superfund liability system or examined carefully the indirect effects of the costs of the Superfund program on other industries. In this book, the authors develop information on who pays the costs and who bears the burden under the current liability scheme in Superfund on a site-by-site basis. They look at short-term financial implications of changes in liability and taxes on key sectors affected by Superfund: chemicals, oil, mining, wood preserving, and commercial property-casualty insurers. They analyze the incidence of different taxing mechanisms and compare and contrast the financial effects on specific industries of the current Superfund program and of several alternative lability and tax-based funding mechanisms available. The alternative liability approaches examined include a scenario in which liability is eliminated for all sites created before Superfund was enacted, as well as a scenario in which parties are released from liability at sites where municipal and industrial wastes were codisposed. Because any change in liability will require a corollary change in trust fund revenues, the authors also assess the economic implications of a variety of taxes that could be used to finance the creation of a larger trust fund for site cleanups. These include an increase in the corporate environmental tax and the implemenation of new taxes, such as an excise tax on commercial insurance. Don Fullerton is a professor of economics and public policy at Carnegie Mellon, H. John Heinz III School of Public Policy and Management. Robert E. Litan, is a senior fellow at Brookings, and formerly was deputy assistant attorney general in the Antitrust Division of the U.S. Department of Justice. Paul R. Portney is vice president and senior fellow at resources for the Future. Katherine N. Probst is a fellow in the Center for Risk Management at Resources for the Future.