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On Obama's Carbon Tax and Tax Credit Idea: A Teaching Note: Working Paper Series--09-08

Smith, Dean Howard and Viglucci, Sarah (2009) On Obama's Carbon Tax and Tax Credit Idea: A Teaching Note: Working Paper Series--09-08. Working Paper. NAU W.A. Franke College of Business.


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The new president is proposing a new tax on carbon to be offset by an income tax credit of up to 80% of the incoming revenues from the government's sale of the carbon credits. This type of dual program results in a very convoluted analysis from the consumer's perspective and therefore distorts the policy implementation aspects of the program. The actual outcome of the policy is the opposite of the proposed political claim. From both a simple supply and demand analysis and a more advanced indifference curve assessment, the amount of income paid by the consumers for gasoline actually increases as the price increases to now buy the more limited gasoline. The policy, due to the limited number of available permits, does achieve the policy goal of reducing carbon emissions attributable to gasoline consumption. However, instead of protecting low income consumers, the gasoline producers are being provided with a wealth transfer!

Item Type: Monograph (Working Paper)
Publisher’s Statement: Copyright, where appropriate, is held by the author.
ID number or DOI: 09-08
Keywords: Working paper, carbon emissions, carbon permits, carbon and tax credits, Obama carbon policy
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
NAU Depositing Author Academic Status: Faculty/Staff
Department/Unit: The W.A. Franke College of Business
Date Deposited: 17 Oct 2015 22:18
URI: http://openknowledge.nau.edu/id/eprint/1511

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