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The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis

Abstract:
This paper measures the direct and indirect incidence of a carbon tax using current income and two measures of lifetime income to rank households. Our results suggest that carbon taxes are more regressive when annual income is used as a measure of economic welfare than when lifetime income measures are used. Further, the direct component of the tax, in any given year, is significantly more regressive than the indirect component. We observe a modest shift over time with the direct component of carbon taxes becoming less regressive and the indirect component becoming more regressive. These effects mostly offset each other and the distribution of the total tax burden has not changed much over time. In addition we find that regional variation has fluctuated over the years of our analysis. By 2003 there is little systematic variation in carbon tax burdens across regions of the country.

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q42: Alternative Energy Sources, Q35: Hydrocarbon Resources, Q38: Nonrenewable Resources and Conservation: Government Policy, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: Carbon tax, greenhouse gases, US

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-8

Published in Volume 30, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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