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Distributional effects of a carbon tax in broader U.S. fiscal reform

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  • Mathur, Aparna
  • Morris, Adele C.

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.

Suggested Citation

  • Mathur, Aparna & Morris, Adele C., 2014. "Distributional effects of a carbon tax in broader U.S. fiscal reform," Energy Policy, Elsevier, vol. 66(C), pages 326-334.
    • Handle: RePEc:eee:enepol:v:66:y:2014:i:c:p:326-334
    DOI: 10.1016/j.enpol.2013.11.047
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