Distributional effects of a carbon tax in broader US fiscal reform

Article Highlights

  • Consistent with earlier findings, @AEIecon’s Aparna Mathur finds that a carbon tax is regressive.

    Tweet This

  • The carbon tax burden would comprise 3.5% of the income of the poorest decile of households.

    Tweet This

  • In the consumption approach, the carbon tax is substantially less regressive.

    Tweet This

 

Editor's note: This study was originally published December 18, 2012. The original report can be accessed using the link at the conclusion of the abstract. To access the up-to-date report, please click the blue arrow above.

Abstract

This paper analyzes the distributional implications of an illustrative $15 carbon tax imposed in 2010 on carbon in fossil fuels. We analyze its incidence across income classes and regions, both in isolation and when combined with measures that apply the carbon tax revenue to lowering other distortionary taxes in the economy. Consistent with earlier findings, we find that a carbon tax is regressive. Using tax swap simulations, we then subtract the burden of other taxes the carbon tax revenue could displace, and compute the net effect on households under three assumptions about how capital and labor income might be distributed.

Click here to read the original paper with charts.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Aparna
Mathur

What's new on AEI

We still don't know how many people Obamacare enrolled
image The war on invisible poverty
image Cutting fat from the budget
image Speaker of the House John Boehner on resetting America’s economic foundation
AEI on Facebook
Events Calendar
  • 22
    MON
  • 23
    TUE
  • 24
    WED
  • 25
    THU
  • 26
    FRI
Monday, September 22, 2014 | 2:30 p.m. – 4:00 p.m.
Policy implications of the new US labor market normal

We welcome you to join us as a panel of economists discuss US wage and price prospects in the coming months and the implications for the Federal Reserve’s current unorthodox monetary policy.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.