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The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis

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  • Kevin A. Hassett
  • Aparna Mathur
  • Gilbert E. Metcalf

Abstract

This paper measures the direct and indirect incidence of a carbon tax using current income and two measures of lifetime income to rank households. Our results suggest that carbon taxes are more regressive when annual income is used as a measure of economic welfare than when lifetime income measures are used. Further, the direct component of the tax, in any given year, is significantly more regressive than the indirect component. We observe a modest shift over time with the direct component of carbon taxes becoming less regressive and the indirect component becoming more regressive. These effects mostly offset each other and the distribution of the total tax burden has not changed much over time. In addition we find that regional variation has fluctuated over the years of our analysis. By 2003 there is little systematic variation in carbon tax burdens across regions of the country.

Suggested Citation

  • Kevin A. Hassett & Aparna Mathur & Gilbert E. Metcalf, 2009. "The Incidence of a U.S. Carbon Tax: A Lifetime and Regional Analysis," The Energy Journal, , vol. 30(2), pages 155-178, April.
    • Handle: RePEc:sae:enejou:v:30:y:2009:i:2:p:155-178
    DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-8
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    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
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    3. S. Paltsev & J. Reilly & H. Jacoby & A. Gurgel & G. Metcalf & A. Sokolov & J. Holak, 2007. "Assessment of U.S. Cap-and-Trade Proposals," Working Papers 0705, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January-J.
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    • F0 - International Economics - - General

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