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Optimality of Relaxing Revenue-neutral Restrictions in Green Tax Reforms

Eduardo L. Giménez () and Miguel Rodríguez ()
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Eduardo L. Giménez: Universidade de Vigo
Miguel Rodríguez: Universidade de Vigo

Hacienda Pública Española / Review of Public Economics, 2020, vol. 233, issue 2, 3-24

Abstract: Green Tax Reforms (GTR) have been initially devised as a policy proposal to tackle simultaneously sever¬al political goals. Recent fiscal stress episodes have defied this view. In this paper, we assess a key issue of interest for policymakers: departing from a fiscal system that does not include any environmental tax, would the tax menu resulting from the implementation of revenue-neutral GTR be the closest available to the optimal one? Our work illustrates in a simple, parametrized model that the answer is negative. These findings deviate from general wisdom and provide theoretical support for the third generation of GTR.

Keywords: Green tax reforms; revenue neutrality; optimal taxation. (search for similar items in EconPapers)
JEL-codes: H23 Q48 (search for similar items in EconPapers)
Date: 2020
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