Vertical and horizontal redistributions from a carbon tax and rebate

Julie Anne Cronin, Don Fullerton, Steven Sexton

Research output: Contribution to journalArticlepeer-review


Are carbon taxes regressive? To calculate effects of a carbon tax on each family’s expenditures, plus distributional effects of three revenue-recycling mechanisms, we employ the US Treasury Distribution Model. It includes 322,000 tax returns, matched social security information, imputations from the Consumer Expenditure Survey, and an input-output matrix to calculate output prices. Accounting for statutory indexing of federal transfer programs, the calculated carbon tax burden as a fraction of consumption is progressive. Rebate of revenues via transfers makes it even more progressive. Within each decile, we find large variation in energy demands such as for heat in winter and cooling in summer. As a result, commonly ignored horizontal redistributions within deciles are shown to exceed vertical redistributions between deciles. Rebates via transfers widen horizontal redistributions. Some reforms deliver net income gains to the poorest families on average, even as a majority of those poor families incur losses.

Original languageEnglish (US)
Pages (from-to)S169-S208
JournalJournal of the Association of Environmental and Resource Economists
Issue numberS1
StatePublished - Mar 2019


  • Climate policy
  • Energy expenditures
  • Revenue-neutral
  • Tax incidence
  • Tax reform

ASJC Scopus subject areas

  • Economics and Econometrics
  • Nature and Landscape Conservation
  • Management, Monitoring, Policy and Law


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