Application of environmental tax shifting (ETS) principles to pesticide and fertilizer use could:

1. Provide an incentive to minimize pesticide and chemical fertilizer use, and
2. Generate revenue to allow for tax relief in other area.

Pesticides and fertilizers are currently exempt from the 5% sales tax in Massachusetts.

U.S. agricultural pesticide use in 1996 was approximately 771 million pounds of active ingredient, or about twice the 1960s level. Significant levels of pesticides are also used inside homes and buildings, and for non-agricultural uses, such as lawns and rights-of-way. Pesticide use is not only dangerous for pests — it is a threat to ourselves, our environment, our food safety, and the health of agricultural workers. According to the American Association of Poison Control Centers, 79,000 American children were involved in household pesticide poisonings in 1995. EPA estimates 250-500 doctor diagnosed cases of pesticide poisonings for every 100,000 agricultural workers. Health effects other than poisonings — more chronic effects — are extremely difficult to recognize, diagnose, or track. Important environmental issues related to pesticide use include groundwater and water supply contamination, proper disposal of waste pesticides and containers, and effects on wildlife.

Massachusetts exempts sales of pesticides and fertilizers from the sales and use tax, as do 29 other U.S. states. This exemption is a tax expenditure, that is, a provision in the tax code that reduces the amount of tax revenues that may be collected. Tax expenditures, usually designed to encourage certain kinds of activities or to aid taxpayers in special circumstances, have a fiscal effect similar to a direct government expenditure.

The Massachusetts exemption of fertilizers, insecticides, and fungicides from sales tax results in an estimated $1.1 million lost revenue annually.

In Massachusetts, pesticide use is regulated by the Pesticide Bureau at the Department of Food and Agriculture. The Pesticide Bureau is in charge of enforcing all aspects of the Massachusetts Pesticide Control Act. Inspectors investigate pesticide misuse and inspect dealer establishments, pest control businesses and pesticide producers. In order to be able to distribute, purchase or use a pesticide in Massachusetts, the product is subject to a two tiered registration process. First, the pesticide product must be registered with the United States Environmental Protection Agency (USEPA). Federally-registered pesticides must also be registered in Massachusetts. The Pesticide Bureau and the Department of Public Health review pesticide applications, and the applications are submitted to the Pesticide Board Subcommittee.

A pesticide product is classified as general use or restricted use. There are several categories of restricted use.

• General Use pesticides can be purchased and used by the general public without undue hazards to the applicator and environment as long as the label instructions are followed;
• Restricted Use pesticides can be purchased and used only by certified applicators because of the inherent toxicity of the pesticide or the potential hazard to the environment.
• State Limited Use pesticides are those that (1) are restricted to certain individuals or groups, (2) require permission from the Department prior to each use or (3) are otherwise restricted;
• Experimental Use pesticides have a temporary permit for testing under specified circumstances consistent with (and no less stringent than) Federal requirements; and

• Special Local Needs pesticides are federally registered, but registered by the state for additional uses and formulated for distribution/use within the state

The Pesticide Bureau issues credentials to dealers selling restricted use pesticides, commercial growers using restricted use pesticides, individuals (e.g. exterminators or lawncare technicians) who apply restricted or general use pesticides. Homeowner pesticides are considered to be general use. The Pesticide Bureau reports that there are about 5,500 individuals who hold licenses or certifications to apply pesticides in Massachusetts. There are about 150 licensed dealers. There are four types of licenses or certifications issued by the Department: Commercial Certification, Private Certification, Applicator License, and Dealer License.

Canceling the sales tax exemption for pesticides and fertilizers is one important step towards encouraging less use of chemicals in homes, on lawns, and on farms. There are fifteen states that do not exempt pesticides and fertilizers from sales tax, and three states that exempt fertilizers but not pesticides.

• Cancel exemption — apply 5% sales tax to pesticides and fertilizers in Massachusetts;
• Apply 5% sales tax to pesticides, but maintain exemption for fertilizers;
• Apply special excise on sale of pesticides classified as "restricted use" as they are determined to be the most hazardous by the MA Pesticide Bureau; or
• Apply sales tax to all pesticides and fertilizers the are not used for food-production.

A recent survey (conducted by Andrew Hoerner, Center for Sustainable Economy) identified a small number of state initiatives that provide tax credits for agricultural pesticide reduction and agricultural water conservation.

In Massachusetts, eradication of this exemption would result in an estimate $1.1 million — resources that could be earmarked for field research and education on sustainable agriculture, promotion of less toxic alternatives, protection of groundwater from agricultural chemical contamination, collection programs for waste pesticides and empty pesticide containers, or efforts to prevent poisonings from common household pesticide products.

Under the tenets of an environmental tax shift, this new revenue stream should be used to provide tax relief to taxpayers, ideally the sub-set of taxpayers subject to the new tax burden. For example, the revenue could be used to benefit farmers whose practices protect the environment. A 5% sales tax likely will not overly threaten pesticide users, especially because they can simply reduce their chemical use by 5% to offset the cost of the sales tax. Options for tax relief include property tax relief for farmers or estate tax relief to support