August 13, 2014

TAX WHAT YOU DON'T WANT, NOT WHAT YOU DO:

How to Stop Tax Inversions With a Carbon Levy. Seriously (Eric Roston,  Aug 13, 2014, Bloomberg)

Revenue raised through climate policy, be it an emissions-permit trading scheme or straight-out carbon tax, could really be used to do anything politicians think important -- fund clean energy research, aid poor communities reliant on coal mining or burning, or refund it to taxpayers quarterly, as Democratic Representative Chris Van Hollen recently proposed.

Two environmental economists propose that federal income from a carbon tax could help reboot the U.S. corporate tax code. And a rebooted corporate tax code would then have the effect of reducing the cost of the carbon tax to GDP.

Lawrence Goulder, of Stanford University, and Marc Hafstead, of the nonpartisan think tank Resources for the Future, studied how three scenarios might affect GDP: a lump-sum refund of U.S. carbon tax revenue to Americans; using the income to pay for personal income tax cuts; or using it to cut corporate income taxes. The study looked at the potential impacts of a carbon tax of $10 per ton of carbon dioxide (or its heat-trapping equivalent from other greenhouse gases) that rises 5 percent a year, and is levied on industrial energy consumption. The tax itself is the same in each case and all three are "revenue neutral," meaning that the money that comes in goes right back out the door for some other purpose:

The researchers found that the third option, cutting corporate taxes, reduces the cost of the carbon tax in GDP better than the other two.
Posted by at August 13, 2014 6:26 PM
  
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