NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Julie Anne Cronin

Department of the Treasury

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Institutional Affiliation: U.S. Department of the Treasury

NBER Working Papers and Publications

March 2017Vertical and Horizontal Redistributions from a Carbon Tax and Rebate
with Don Fullerton, Steven E. Sexton: w23250
Because electricity is a higher fraction of spending for those with low income, carbon taxes are believed to be regressive. Many argue, however, that their revenues can be used to offset the regressivity. We assess these claims by employing data on 322,000 families in the U.S. Treasury’s Distribution Model to study vertical redistributions between rich and poor, as well as horizontal redistributions among families with common incomes but heterogeneous energy intensity of consumption (different home heating and cooling demands). Accounting for the statutory indexing of transfers, and measuring impacts on annual consumption as a proxy for permanent income, we find that the carbon tax burden is progressive, rising across deciles as a fraction of consumption. The rebate of revenue via transfer...

Published: Julie Anne Cronin & Don Fullerton & Steven Sexton, 2019. "Vertical and Horizontal Redistributions from a Carbon Tax and Rebate," Journal of the Association of Environmental and Resource Economists, vol 6(S1), pages S169-S208.

September 2016Vertical and Horizontal Redistributions from a Carbon Tax and Rebate
with Don Fullerton, Steven Sexton
in Energy Policy Tradeoffs between Economic Efficiency and Distributional Equity, Tatyana Deryugina, Don Fullerton, and Billy Pizer, organizers
Are carbon taxes regressive? To calculate effects of a carbon tax on each family’s expenditures, plus distributional effects of three revenue-recycling mechanisms, we employ the US Treasury Distribution Model. It includes 322,000 tax returns, matched social security information, imputations from the Consumer Expenditure Survey, and an input-output matrix to calculate output prices. Accounting for statutory indexing of federal transfer programs, the calculated carbon tax burden as a fraction of consumption is progressive. Rebate of revenues via transfers makes it even more progressive. Within each decile, we find large variation in energy demands such as for heat in winter and cooling in summer. As a result, commonly ignored horizontal redistributions within deciles are shown to exceed vert...
 
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