A New Proposal of Ecological Tax Reform

Takumi Haibara and Hiroshi Ohta

No 24, GSICS Working Paper Series from Graduate School of International Cooperation Studies, Kobe University

Abstract: Using the simplest general equilibrium model incorporating consumption-generated pollution externalities, we identify the condition under which a revenue-neutral tax reform (RNTR), which combines increased consumption tax with reduced income tax, increases pollution emissions. More importantly, we propose a new approach to ecological tax reform, namely carbon-neutral tax reform (CNTR). We show that under plausible conditions, the CNTR raises government revenue and increases economic efficiency without jeopardizing the environment. Furthermore, the CNTR can put a limit on the degree of trade-off, which is frequently accentuated by the RNTR, between environmental and nonenvironmental efficiency. The present paper could herald a new era of tax reform and therefore offers a promising research agenda.

Keywords: Revenue-neutral tax reforms; Carbon-neutral tax reforms; Welfare (search for similar items in EconPapers)
JEL-codes: H21 H23 Q58 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2011-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:kcs:wpaper:24

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