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

  • Kevin A. Hasset
  • Aparna Mathur
  • Gilbert Metcalf

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 that when proxies for lifetime income are used. Further, the direct component of the tax, in any given year, is significantly more regressive than the indirect component. In fact, for 1987, the indirect component of the tax is mildly progressive. 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.

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File URL: http://ase.tufts.edu/econ/research/documents/2007/metcalfCarbonTax.pdf
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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0714.

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Date of creation: 2007
Date of revision:
Handle: RePEc:tuf:tuftec:0714
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Web page: http://ase.tufts.edu/economics

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  1. Gilbert E. Metcalf, 2008. "An Empirical Analysis of Energy Intensity and Its Determinants at the State Level," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-26.
  2. 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.
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