Any new carbon tax imposed in exchange for lower income tax rates
would hit the poor the most unless lawmakers take additional steps to
offset higher costs, according to a new Congressional Budget Office
analysis.
In a working paper issued Tuesday, CBO said lower rates alone would tilt relief to the rich, while targeted payments directly to poor households would lower net revenues.
The analysis made no recommendations. Still, it was published as some conservatives and Democrats say a carbon tax could address climate change and generate revenue that would allow lower tax rates.
CBO found that of seven options to mitigate the regressive nature of a carbon tax on low-income households -- including lower tax rates -- all but one would preserve the incentive to reduce carbon emissions. But only three, CBO said, would prompt employment and savings.
Past studies by CBO have estimated the higher costs of a $28 per metric ton tax on emissions would prompt higher annual consumer costs ranging from $425 for the lowest-income families to $1,380 for the wealthiest. Those amounts equate to about 2.5 percent of low income family after-tax income, compared to less than 1 percent for the highest earners.
CBO said that lower-income families devote a greater share of their spending to necessities, such as gasoline and electricity, which are energy intensive and would rise in price with a carbon tax.
Yet some families would automatically get more federal assistance if consumer prices rise. Social Security, Supplemental Security Income and food assistance are all pegged to the Consumer Price Index, and would return some of the tax costs through higher monthly payments.
Read more: http://www.washingtonguardian.com/taxing-poor
In a working paper issued Tuesday, CBO said lower rates alone would tilt relief to the rich, while targeted payments directly to poor households would lower net revenues.
The analysis made no recommendations. Still, it was published as some conservatives and Democrats say a carbon tax could address climate change and generate revenue that would allow lower tax rates.
CBO found that of seven options to mitigate the regressive nature of a carbon tax on low-income households -- including lower tax rates -- all but one would preserve the incentive to reduce carbon emissions. But only three, CBO said, would prompt employment and savings.
Past studies by CBO have estimated the higher costs of a $28 per metric ton tax on emissions would prompt higher annual consumer costs ranging from $425 for the lowest-income families to $1,380 for the wealthiest. Those amounts equate to about 2.5 percent of low income family after-tax income, compared to less than 1 percent for the highest earners.
CBO said that lower-income families devote a greater share of their spending to necessities, such as gasoline and electricity, which are energy intensive and would rise in price with a carbon tax.
Yet some families would automatically get more federal assistance if consumer prices rise. Social Security, Supplemental Security Income and food assistance are all pegged to the Consumer Price Index, and would return some of the tax costs through higher monthly payments.
Read more: http://www.washingtonguardian.com/taxing-poor
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