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From Regressive Pollution Taxes to Progressive Environmental Tax Reforms

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  • Mireille Chiroleu-Assouline

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

  • Mouez Fodha

    () (LEO - Laboratoire d'Économie d'Orleans - CNRS - Centre National de la Recherche Scientifique - Université de Tours - UO - Université d'Orléans, PSE - Paris School of Economics)

Abstract

European countries have increased their use of environmental tax instruments by designing new tax bases. But, many countries have to face the opposition of the public opinion, for fear of the distributive consequences of these environmental tax reforms. This paper sheds light on the distributive consequences of environmental tax policies when households are heterogeneous. The objective is to assess whether an environmental tax reform could be Pareto improving, when the revenue of the pollution tax is recycled by a change in the labor tax properties. We show that, whatever the degree of regressivity of the environmental tax alone, it is possible to design a recycling mechanism that renders the tax reform Pareto improving, by simultaneously decreasing the average rate of the wage tax and increasing its progressivity.

Suggested Citation

  • Mireille Chiroleu-Assouline & Mouez Fodha, 2012. "From Regressive Pollution Taxes to Progressive Environmental Tax Reforms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00719762, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00719762
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00719762
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    References listed on IDEAS

    as
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    Keywords

    Environmental tax reform; heterogeneity; welfare analysis; tax progressivity; progressivité de l'impôt; économie du bien-être; Réforme fiscale verte; hétérogénéité;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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