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Research report

How Should Governments Use Revenue from Corrective Taxes?

Adele C. Morris, Donald Marron
January 29, 2016
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Abstract

Corrective taxes can encourage healthier, safer, and less polluting behavior. But how should governments use their revenue? Options abound to cut other taxes, boost spending, or reduce borrowing. We organize those uses into four categories: offsetting new burdens, furthering the same goal, compensating people harmed by the taxed activity, or funding unrelated priorities. We illustrate them with examples including greenhouse gas emissions, unhealthy foods, financial transactions, tobacco, gasoline, and other products. We discuss the pros and cons of competing revenue uses and describe tradeoffs across their social benefits and political appeal.

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State and Local Issues State and local taxes
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Meet the Experts

  • Adele C. Morris
    Senior Fellow and Policy Director for the Climate and Energy Economics Project
  • Donald Marron
    Institute Fellow
Brief

Understanding the Maze of Recent Child and Work Incentive Proposals

Elaine Maag, Nikhita Airi
June 1, 2020
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