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Environmental-tax financed Social Security Tax Cuts and the Double Dividend

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  • Tetsuo Ono

Abstract

This paper presents a two-period overlapping-generations model in which (i) firms create environmentally harmful emissions as by-products of production, and (ii) social security tax revenue from the working young is transferred to the retired elderly as pay-as-you go social security benefits. In this framework, the paper considers a revenue-neutral reform in which the government undertakes an environmental-tax-financed social security tax cut; the environmental-tax revenue is utilized as a means of financing social security benefits. It is shown that the reform attains a double dividend - namely, improvement is demonstrated in both the nonenvironmental and the environmental utility - when (i) the economy attains a dynamically inefficient equilibrium, (ii) the share of capital (labor) is low (high), and (iii) the social security tax rate before the reform lies within a certain range.

Suggested Citation

  • Tetsuo Ono, 2005. "Environmental-tax financed Social Security Tax Cuts and the Double Dividend," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(2), pages 178-200, July.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200507)61:2_178:efsstc_2.0.tx_2-g
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    File URL: https://www.mohrsiebeck.com/en/article/environmentaltaxfinanced-social-security-tax-cuts-and-the-double-dividend-1016280015221054553548
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    Citations

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    Cited by:

    1. Mireille Chiroleu-Assouline & Mouez Fodha, 2023. "Debt, tax and environmental policy [Dette, taxe et politique environnementale]," Post-Print halshs-04181981, HAL.
    2. Lars Kunze & Christiane Schuppert, 2009. "Financing Social Security by Taxing Capital Income – A Bad Idea?," Ruhr Economic Papers 0090, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2018. "Environmental Tax Reform under Debt Constraint," Annals of Economics and Statistics, GENES, issue 129, pages 33-52.
    4. Lars Kunze & Christiane Schuppert, 2010. "Financing social security by taxing capital income: A bad idea?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(3), pages 243-262, September.
    5. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," Working Papers halshs-01023798, HAL.
    6. Frédéric Gonand, 2019. "Inégalité intergénérationnelle et recyclage d’une taxe carbone," Revue économique, Presses de Sciences-Po, vol. 70(3), pages 411-440.
    7. repec:zbw:rwirep:0090 is not listed on IDEAS
    8. Tetsuo Ono, 2008. "Environmental tax reform in an overlapping-generations economy with involuntary unemployment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(4), pages 213-238, December.

    More about this item

    Keywords

    revenue-neutral reform; social security tax cuts; social security reform; overlapping generations; environmental tax reform;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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