Concern about environmental impacts of nitrogen fertilizer use is increasing. Mainstream agriculture is dependent on nitrogen fertilizer and use patterns are polluting water resources. A five cent tax on nitrogen fertilizer is shown to have three benefits. National nitrogen fertilizer use is estimated to decline about 10 percent. Use of legume-produced nitrogen increases and crop use of nitrogen declines only 5 percent. A reduction in wasted legume-produced nitrogen equal to 2.5 percent of nitrogen application in the baseline occurs due to more growing of legumes and other crops in rotation. The nitrogen tax is not without costs. Soil erosion and pesticide use are estimated to increase 2.2 and 1.7 percent, respectively, in response to the tax.