Climate Change Is Regressive. A Carbon Tax Doesnât Have To Be. Climate Change Is Regressive. A Carbon Tax Doesn't Have To Be. | ThinkProgress Climate Climate Change Is Regressive. A Carbon Tax Doesn't Have To Be. by Jeremy Deaton - Guest Contributor Oct 13, 2015 8:00am
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Climate Change Is Regressive. A Carbon Tax Doesn’t Have To Be.
Climate Change Is Regressive. A Carbon Tax Doesn't Have To Be. | ThinkProgress
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7/17/2019 Climate Change Is Regressive. A Carbon Tax Doesn’t Have To Be.
energy to produce everything from TVs to hamburger buns, the increased cost of production will
drive up the price of consumer goods or suppress wages. Either way, low-income families, who
already spend a larger proportion of their income on transportation, groceries and utility bills, will
be hit the hardest.
That's not to say a carbon tax couldn't be made to work for struggling families. With a revenue-
neutral carbon tax, the federal government would return the proceeds to the taxpayers, and how
lawmakers go about recycling the proceeds could make the difference between narrowing and
widening the wealth gap. At an event sponsored by Resources for the Future, an environmental
think tank, Dr. Roberton Williams said "The carbon tax by itself is regressive, but what you do with
revenue is much more important. So, we can easily take a regressive policy and turn it progressive
by how we use the revenue."
Cutting the corporate tax would be efficient, but it would hurt low-income households
One way to return carbon tax revenue would be to cut the corporate income tax ("capital recycling").
Because a corporate income tax can discourage business investment, returning revenue to
corporations could provide a powerful stimulus to the economy, more than other kinds of tax cuts.
Unfortunately, most of the gains would go to the wealthiest Americans. Said Williams, "The case that
is the best for the economy as a whole, capital tax recycling, is the worst for the middle class." Think
of it this way: If Bill Gates walks into a football stadium, every person in the stadium may be a
million dollars richer on average, but that doesn't translate into real wealth for anyone except for a
single billionaire. The point is, distribution matters.
Cutting the the payroll tax ("labor recycling") would be more equitable than cutting the corporate
income tax, but even in this scenario the poorest Americans would be worse off than they would
without a carbon tax. Writing in Resources magazine, Chad Stone, Chief Economist at the Center on
Budget and Policy Priorities, notes, "A carbon tax should not make poor families poorer or pushmore people into poverty. Climate rebates should be designed to fully offset the impact of a carbon
tax on the purchasing power of low- and moderate-income households."
A lump-sum rebate is less efficient, but low- and middle-income families would be better off
So, what is a fairer way to return revenue from a carbon tax? Take the total accumulated revenue,
divide it into 310 million equal shares, and mail a check to every American. This is what's commonly
known as "fee and dividend." Said Williams, "The lump sum rebate -- that just does an enormous
amount for the bottom end. Again, because that flat dollar amount is a much bigger percentage
amount for poorer people than it is for wealthy people." The lump-sum rebate turns the Bill Gates-football stadium analogy on its head. With a rebate, the average wealth of stadium goers decreases,
but most of the losses come from the pockets of a singular tech tycoon.
This graph shows the net effect on income of a all on Four Summit revenue-neutral carbon tax of