April 2021

Recycling Carbon Tax Earnings to Maximize Welfare

Stephie Fried, Kevin Novan, William B. Peterman

Abstract:

This paper explores how to recycle carbon tax earnings back to households to maximize welfare. Using a general equilibrium lifecycle mannequin calibrated to evaluate the heterogeneity sms lån på minuttetin the U.S. economy, we secure the optimum coverage makes use of two thirds of carbon-tax earnings to diminish the distortionary tax on capital earnings while the remaining one third is weak to develop the progressivity of the labor-earnings tax. The optimum coverage attains elevated welfare and further equality than the lump-sum rebate manner most smartly-appreciated by policymakers in addition to the style at the foundation prescribed by economists–which referred to as exclusively for reductions in distortionary taxes.

Key phrases: Carbon tax; overlapping generations; earnings recycling

DOI: https://doi.org/10.17016/FEDS.2021.023

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Closing Update:
April 02, 2021

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