Abstract
To combat a serious litter problem in Israel, a law has been enacted that authorizes fines for littering and imposes an ad valorem tax on disposable beverage containers. This tax, which has been controversial, can be justified on second-best grounds, given constraints on the magnitude of the fine and on the quantity of resources available for enforcement, and given that beverages in disposable containers and littering are net complements. In this paper, the optimal second-best tax rate is estimated and found to exceed the current ad valorem tax rate on containers.
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