Wilcoxen paper on carbon taxes and fiscal reform in the US published in National Tax Journal

Carbon Taxes and Fiscal Reform in the United States

Dale W. Jorgenson, Richard J. Goettle, Mun S. Ho & Peter J. Wilcoxen

National Tax Journal, February 2015

Peter Wilcoxen

Public Administration & International Affairs Department

Center for Environmental Policy and Administration

Center for Policy Research

Climate Change

National Tax Journal

Peter Wilcoxen

In this paper the authors consider the economic and environmental impacts of taxes on emissions of greenhouse gases. Substituting carbon taxes for other sources of revenue or using the proceeds to reduce deficits or finance expenditures are the keys to integration of carbon taxes with fiscal reform. Recycling carbon tax revenues through reductions of capital income tax rates provides the largest margin of economic benefits over the costs of emissions control. Reducing capital tax rates lowers the cost of capital services and increases the rate of capital formation. This mechanism provides a dramatic illustration of the power of intertemporal general equilibrium modeling in the design of new energy and environmental policies for the United States.