To address negative externalities, some burden on the target group must
be imposed to force it to incorporate the costs of its action (or failure to act).
The three primary options are regulations, taxes, and marketable permits
(Weimer and Vining, 2004). Regulations on output with no compensation
tend to be most burdensome. They require the target group to absorb costs
to meet the standard but often with high uncertainty about the expenditures
necessary. The target also has little discretion in how to alter behavior and
the sanctions for not complying carry a social stigma not found with either
taxes or permits. Taxes are the next most burdensome. Costs are imposed at
all levels of output. However, the details of tax policies are generally less
visible to the public, hidden in the tax code rather than in legislation directed
to a specific problem. Definitions of the tax base, changes in tax rates,
and use of deductions or tax credits can create large variation in the costs
imposed on the target group. A high tax rate combined with generous tax
credits can negate the policy’s impact, leading to a ‘‘hollow burden’’ in the
social construction terminology