Rethinking the Green New Deal: Using Climate Policy to Address Inequality

The Green New Deal is best understood as an ambitious mobilization of the economic and environmental resources of the country to achieve the twin targets of net-zero greenhouse gas emissions and a more equal and fair society where workers have access to decent paying jobs with benefits, healthcare, housing, and economic security. The challenge with the Green New Deal is to address climate and inequality issues together and to finance solutions in a practical and effective manner. This paper presents tax reform solutions to address two of the central pillars of the Green New Deal — reducing greenhouse gas emissions and improving the economic situation of low-income households. Using a carbon tax as a central mechanism for achieving these goals, this paper presents a review of the existing literature on the impacts of a carbon tax. It then builds upon this idea by using a micro-simulation tax model to estimate the costs and distributional impacts of several other tax reforms. Ultimately, the paper presents two hypothetical reform proposals that implement a carbon tax, additional revenue raisers, and other targeted low-income tax reforms, such as changes to the earned income tax credit (EITC) and child tax credit (CTC), to create revenue-neutral solutions to reduce greenhouse gas emissions and raise the average after-tax income of the bottom quintile.