R Street Institute

Policy Studies Carbon Pricing

Would a revenue-neutral carbon tax lead to bigger government?

by Josiah Neeley
Oct 12, 2018
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Key Points

A carbon tax swap is likely to remain stable over the long term and won’t grow the size of government.
A carbon tax can’t be exploited as an endless source of new government revenue because higher tax rates would drive quicker emissions reductions.
Taxes are ultimately driven by spending, but what we tax can have a big impact on economic growth. A carbon tax swap would boost economic growth in addition to helping the environment.

“Unlike revenue from income, sales or property taxes, which tends to increase over time even at a constant tax rate, revenue from a carbon tax is likely to remain stable or fall gradually as emissions decline.”

Press release – R Street policy paper: Would a revenue-neutral carbon tax lead to bigger government?

Image credit: Reinhard Tiburzy

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