Working Paper Number
434
Publication Date
8-2017
Abstract
This paper examines the distributional impacts of a $50 tax per ton of CO2. Using Input-Output tables we calculate the carbon intensity of goods to estimate households’ carbon footprints. Findings indicate the tax is regressive. Using the revenue to reduce taxes on labor leaves 60 percent of people worse off, while rebating the revenue in equal dividends increases welfare for 55 percent of individuals, including 84 percent in the bottom half of the distribution. Many economists have dismissed dividends on efficiency grounds, but we show that potential macroeconomic benefits of tax cuts are insufficient to protect the poor.
DOI
https://doi.org/10.7275/27437187
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.