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1 Alex Muresianu, Carbon Taxes in Theory and Practice 1 (2023)

handle is hein.taxfoundation/carbtaxi0001 and id is 1 raw text is: Carbon Taxes in Theory and Practice FISCAL Alex Muresianu Policy Analyst FACT No. 812 May 2023 Key Findings • In theory, the carbon tax is the most efficient approach to address climate change. • In practice, however, the policymaking process can interfere and weaken the policy. • We consider several theoretical arguments for carbon taxes and the evidence from carbon taxes implemented around the world related to emissions, economic growth, distribution and revenue recycling options, other environmental taxes, green subsidies, and environmental regulations. • Most of the major arguments hold up well: the tax is not a significant drag on economic growth, it reduces emissions, and the revenue is usually returned to taxpayers by reducing other taxes. • One argument in particular falls short: the tax is rarely accompanied by complementary efforts to streamline environmental policymaking. • When looking at carbon taxes around the world, the United States can find some aspects to emulate and others to avoid. • While it might be difficult to transfer the exact theoretical carbon tax into practice, a next-best, real-world carbon tax is certainly achievable. The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2022 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org