Tax Deductions , Environmental Policy , and the “ Double Dividend ” Hypothesis

  title={Tax Deductions , Environmental Policy , and the “ Double Dividend ” Hypothesis},
  author={Ian W. H. Parry and Antonio M. Bento},
Recent studies find that environmental tax swaps typically exacerbate the costs of the tax system and therefore do not produce a “double dividend”. We extend previous models by incorporating taxfavored consumption goods (e.g. housing, medical care). In this setting, the efficiency gains from recycling environmental tax revenues are larger because pre-existing taxes distort the consumption bundle, besides distorting factor markets. We find that a revenue-neutral emissions tax (or auctioned… CONTINUE READING

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