The Initial Incidence of a Carbon Tax across Income Groups

Roberton Williams, Hal Gordon (), Dallas Burtraw, Jared Carbone and Richard D. Morgenstern ()
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Hal Gordon: Resources for the Future
Richard D. Morgenstern: Resources for the Future

RFF Working Paper Series from Resources for the Future

Abstract: Carbon taxes efficiently reduce greenhouse gas emissions but are criticized as regressive. This paper links dynamic overlapping-generation and microsimulation models of the United States to estimate the initial incidence. We find that while carbon taxes are regressive, the incidence depends much more on how carbon tax revenue is used. Recycling revenues to cut capital taxes is efficient but exacerbates regressivity. Lump-sum rebates are less efficient but much more progressive, benefiting the three lower income quintiles even when ignoring environmental benefits. A labor tax swap represents an intermediate option, more progressive than a capital tax swap and more efficient than a rebate.

Keywords: carbon tax; distribution; incidence; tax swap; income quintiles; climate change (search for similar items in EconPapers)
JEL-codes: H22 H23 Q52 (search for similar items in EconPapers)
Date: 2014-08-07
New Economics Papers: this item is included in nep-ene, nep-env, nep-pub and nep-res
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Citations: View citations in EconPapers (28)

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Journal Article: The Initial Incidence of a Carbon Tax Across Income Groups (2015)
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