Full Title: A Carbon Tax in the Context of Budget Reconciliation
Author(s): Joseph Majkut, Annabelle Swift, Peter Marsters
Publisher(s): Niskanen Center
Publication Date: February 18, 2021
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Budget reconciliation is a legislative procedure which allows certain legislation to avoid the filibuster in the U.S. Senate and thus only require 51 votes. With a high degree of polarization between the two political parties and a recent trend of Congress passing large legislative changes through reconciliation, this limited procedural mechanism may be used to advance climate policy this year.
This paper explores how budget reconciliation could include a carbon tax to raise new revenue and reduce greenhouse gas emissions. Implementing a carbon tax by itself would raise various concerns, including its impact on economic growth; energy prices for low-income earners; the economic prospects of disadvantaged communities, including those reliant on fossil-fuel production; and the ability to achieve key climate policy goals. A comprehensive climate change strategy would involve not only a carbon tax but also complementary measures to make the overall policy environment more effective at reducing emissions, more equitable, and less costly. Here, we explore how budgetary measures could be combined to achieve outcomes under reconciliation that would be similar to a climate policy drafted under standard procedures.