What to Do with $200 Billion: Give It Back

This chapter discusses how economists measure the burden of a carbon tax—which households have less spending power because of the tax. It also discusses fairness in the tax code and how the revenue, which can be substantial, from a carbon tax can be returned to households and businesses in ways that enhance the fairness and efficiency of the overall tax system. A common belief is that a carbon tax is regressive—that it disproportionately burdens poor households. Studies discussed in this chapter refute this belief and argue that judicious use of the carbon tax revenue can make a carbon tax reform (tax and return of the revenue) even more progressive.