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Research report

Carbon Taxes as Part of the Fiscal Solution

Samuel Brown, William G. Gale, Fernando Saltiel
March 11, 2013
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Abstract

The U.S. faces substantial and unsustainable budget deficits, which will require tax increases and spending cuts to resolve. A carbon tax could raise revenues, with several positive effects: it would improve environmental outcomes, increase economic efficiency, and allow the elimination of selected tax subsidies and spending programs. While a carbon tax imposes a larger burden on lower-income households, the opposite applies for many of the other options like scaling back tax expenditures. A long-term deficit reduction package that included a reduction in income tax expenditures as well as a carbon tax and offsetting payments could provide a balanced distributional effect.

Research Area

Business Taxes Energy/environmental tax Federal Budget and Economy
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Research report

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