Full Title: Carbon “Tax Swap” Deals: A Review and Critique
Author(s): Robert P. Murphy
Publisher(s): Institute for Energy Research
Publication Date: 11/2012
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A growing number of academics and policymakers have recommended a revenue-‐neutral carbon “tax swap” deal, under which the revenues from a new carbon tax would be used to reduce pre-‐existing taxes, dollar for dollar. Conservative proponents argue that such a proposal would not only mitigate potential environmental damage down the road, but would provide immediate relief to Americans by reducing the inefficiency of the tax code. By “taxing bads not goods,” these conservatives believe, a revenue-‐neutral carbon tax swap would lead to more economic growth immediately, and would reduce future climate change damages as a bonus. Unfortunately, there are many problems with this conservative claim, including both technical and pragmatic flaws in the position.