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Distributional Effects of a Carbon Tax in a Broader US Fiscal Reform

Distributional Effects of a Carbon Tax in a Broader US Fiscal Reform

Full Title:  Distributional Effects of a Carbon Tax in a Broader US Fiscal Reform
Author(s): Aparna Mathur and Adele C. Morris
Publisher(s):  The Brookings Institution
Publication Date: December 1, 2012
Full Text: Download Resource
Description (excerpt):

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. The analysis first uses an input-output table approach to estimate the effect of the carbon tax on consumer prices, assuming that the tax is passed through fully to retail prices. Then, using Consumer Expenditure Survey data on consumption patterns, we estimate the burdens across households, assuming no behavioral response to the new prices.

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