The Taxable Surplus in Water Values

Taxes or rental charges for water use are bearable and legal and would spur water economy, but the following fallacies impede acceptance of these ideas: (1) water rights are real property, (ii) a charge on water would be passed on to consumers, (iii) the cost of water is just its development cost, (iv) markets solve most problems if property rights are firm, (v) only consumptive use is a social cost, and (vi) common rights must spell tragedy. This paper dispels these fallacies while advocating taxation and/or rental charges for water use.