Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/280579 
Year of Publication: 
2018
Series/Report no.: 
AEI Economics Working Paper No. 2018-02
Publisher: 
American Enterprise Institute (AEI), Washington, DC
Abstract: 
This report investigates the impact of a revenue-neutral carbon tax whereby revenues raised from a $25/ton carbon tax are used to reduce the tax rate on wage income by a commensurate amount. Recognizing that such a reform is not revenue-neutral for every single taxpayer, nor even revenue-neutral in every county, we investigate the degree of spatial variation across all counties and sort results by the historical partisan preferences of those counties. Key findings include: 1. The net impact of a federal $25/ton carbon tax offset by a reduction in wage taxes is modest across most counties. The average taxpayer in the median county experiences less than a $100 change in net tax liability. 2. We find that the average net impacts among Republican-leaning counties, swing counties, and Democratic-leaning counties are relatively similar. For example, the difference between the average impact in Republican-leaning counties and Democratic-leaning counties is just $100 per year. 3. Among 2,467 Republican-leaning counties, 2,238 will experience a net impact that is negligible (less than 0.5 percent of income) or positive. 4. Total positively affected counties from the tax swap represent 40 percent of the U.S. population. Of these, 39 percent are Republican voters. 5. Incorporating the domestic social cost of carbon (SCC) and the projected county-level climate change risk yields additional economic benefit throughout many counties, primarily in Florida, Louisiana, and Texas. 6. When including the SCC effect, total positively affected counties represent 58 percent of the U.S. population. Of these, 43 percent are Republican voters.
Subjects: 
carbon tax
JEL: 
A
Document Type: 
Working Paper

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