Navigation Links
Pollution tax rebates little help for low-income workers
Date:2/22/2011

CHAMPAIGN, Ill. Although policymakers believe the regressiveness of pollution taxes can be offset by returning revenue to the low paid through a reduced labor tax, that approach may not work, and also could have the unintended consequence of shrinking some workers' overall real net wages, according to research by a University of Illinois energy policy expert.

Don Fullerton, a finance professor and former deputy assistant secretary of the U.S. Treasury Department, says that using revenue from pollution taxes to lessen its regressiveness on low-wage workers is not enough to offset higher commodity prices and shrunken real wages that would result from such a tax.

"Revenue from a carbon tax would certainly help, but it wouldn't be enough to protect low-wage households from any harm," said Fullerton, a researcher in the U. of I. Institute of Government and Public Affairs and the Center for Business and Public Policy in the College of Business. "A carbon tax is going to have costs, and while we might be able to play with the distributional burden of the costs, it's hard to protect low-income workers completely. There may just not be enough money to help them out."

Any sort of carbon tax, cap-and-trade or carbon pricing is likely to raise the price of commodities consumed by low-income people an undesirable effect that lawmakers are aware of, Fullerton said.

Although the cap-and-trade bill that passed the House is now dead, lawmakers wrote the bill with an eye toward helping low-income households purchase electricity.

"I think policymakers in general recognize that it's going to have regressive effects when the prices of electricity, gasoline and heating fuel go up, because these goods make up a big fraction of low-income budgets," said Fullerton, an expert on the economic impact of environmental regulations. "That's why these types of tax rebate proposals are floated, to make a pollution tax or a carbon tax more politically viable."

According to the research, even though the pollution tax injures both high- and low-skilled labor through higher prices of goods and services, the wage rates for low-skilled labor also declines. In almost all of the study's economic models, the rebate of all revenue to low-skilled labor still does not prevent a reduction in their overall real net wages.

"If a firm is going to reduce its carbon emissions, it might do more of something else," Fullerton said. "In order to cut emissions, they might need more high-tech abatement capital and labor, and that means buying more high-skill labor. That drives up the high-skill wage, which is going to help high-wage earners but hurt lower income people through another mechanism. So the effects of pollution taxes are felt not only on the 'uses' side of income in the form of higher product prices, but also on the 'sources' side of income with declining relative wage rates for low skilled workers."

But just because the poor would bear a burden of a carbon tax doesn't mean it's not worth doing in some form or another, said Fullerton, who heads the environmental and energy economics program for the National Bureau of Economic Research, a nonprofit, nonpartisan think tank that provides economic analysis for government, business and the academic community.

"The take-home message is that there's no such thing as a free lunch," he said. "Everyone is going to bear some costs of carbon pricing, but the point of it is to avoid the even greater costs of global warming and climate change.

"Nobody wants to bear these costs, but the alternatives are much worse more carbon dioxide and greenhouse gases, more climate change, global warming, and more extreme weather events. All of these bad outcomes disproportionally hurt the poor."


'/>"/>

Contact: Phil Ciciora
pciciora@illinois.edu
217-333-2177
University of Illinois at Urbana-Champaign
Source:Eurekalert  

Related biology news :

1. University of Miami scientists find new way to estimate global rainfall and track ocean pollution
2. Morning-after spike in ozone air pollution from Super Bowl XLV?
3. Findings on pollution damage to human airways could yield new therapies
4. Dodds contributes to new national study on nitrogen water pollution
5. Virginia Tech engineer identifies new concerns for antibiotic resistance, pollution
6. Plants play larger role than thought in cleaning up air pollution
7. Sediment pollution should be included in water quality assessment
8. National study finds strong link between diabetes and air pollution
9. Pollution takes its toll on the heart
10. Satellite data reveal seasonal pollution changes over India
11. UM advanced bio-filtration system promises less Chesapeake pollution
Post Your Comments:
*Name:
*Comment:
*Email:
Related Image:
Pollution tax rebates little help for low-income workers
(Date:6/23/2017)... N.Y. , June 23, 2017  IBM (NYSE: ... dairy research, today announced a new collaboration using next-generation ... chances that the global milk supply is impacted by ... Cornell University has become the newest academic institution to ... a food safety initiative that includes IBM Research, Mars, ...
(Date:5/16/2017)... TEANECK, N.J. , May 16, 2017  Veratad ... leading provider of online age and identity verification solutions, ... the K(NO)W Identity Conference 2017, May 15 thru May ... Ronald Regan Building and International Trade Center. ... across the globe and in today,s quickly evolving digital ...
(Date:4/24/2017)... , April 24, 2017 ... and partner with  Identity Strategy Partners, LLP (IdSP) ... "With or without President Trump,s March 6, 2017 ... Terrorist Entry , refugee vetting can be instilled with ... resettlement. (Right now, all refugee applications are suspended ...
Breaking Biology News(10 mins):
(Date:8/23/2017)... ... August 23, 2017 , ... ... ability to manipulate 3D models of pediatric patients’ neuroanatomy and accurately tailor radiation ... of the Journal of Medical Imaging. The advance is reported in an article ...
(Date:8/23/2017)... ... 22, 2017 , ... Patients suffering from gum disease and failing implants now ... Malik. Dr. Malik, of Broward Center for Laser Periodontics and Implants , ... future of dentistry with regenerative periodontal procedures. , "I initially became ...
(Date:8/23/2017)... Virginia (PRWEB) , ... August 23, 2017 , ... NDA ... PhD, former Director of the Office of Device Evaluation at the FDA’s Center for ... industries, has joined the firm as an Expert Consultant. , Prior to his FDA ...
(Date:8/22/2017)... ... August 22, 2017 , ... One ... is the practice of opioid-dose sparing. Opioid-dose sparing refers to the reduction of ... including with non-steroidal anti-inflammatory drugs (NSAIDs). , The potential for new therapies to ...
Breaking Biology Technology: