This paper examines potential environmental tax policy reforms. It focuses primarily on a carbon tax, but also more briefly considers a range of other possible changes. These include revising or eliminating various energy and environmental tax credits and deductions (many of which might become unnecessary in the presence of a carbon tax), as well as changes to energy taxes that have substantial environmental implications (such as the federal gasoline tax). The paper draws on recent theoretical and empirical research to evaluate the effects of such reforms on tax revenue, pollution emissions, economic efficiency, and income distribution.
This paper was written for the 2015 Conference on the Economics of Tax Policy, sponsored by the Robert D. Burch Center at the University of California-Berkeley, the Penn Wharton Public Policy Initiative, and the Urban-Brookings Tax Policy Center. I am grateful to Alan Auerbach, Don Fullerton, and participants at the conference for their comments and suggestions. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.