The next president is in for a rough welcome to the Oval Office given the list of immediate crises and slow-burning policy challenges, both foreign and domestic. What should Washington do? Why should the average American care? We’ve set out to clearly define US strategic interests and provide actionable policy solutions to help the new administration build a 2017 agenda that strengthens American leadership abroad while bolstering prosperity at home.
The following is an excerpt from Adele Morris and Aparna Mathur’s chapter in a new book discussing the implementation of a carbon tax in the nited States:
One way to ensure a carbon tax is progressive is to return all of the carbon tax revenue to households in equal rebates, also called lump-sum transfers. But rebates don’t lower any existing taxes, so they don’t increase the after-tax returns from working or for investing and saving and thereby encourage more productive economic activity. This would be a large forgone opportunity. Research shows that using carbon tax revenue to reduce other taxes can greatly improve the economics of a price on carbon and climate policy more generally. This is called “revenue recycling” with a “tax swap.”