Electronic Resource
Springer
International tax and public finance
2 (1995), S. 157-183
ISSN:
1573-6970
Keywords:
environmental taxation
;
environmental tax reform
;
second-best environmental taxation
;
double-dividend
;
general equilibrium tax analysis
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract There has been considerable debate as to whether the revenue-neutral substitution of environmental taxes for ordinary income taxes might offer a double dividend: not only (1) improve the environment but also (2) reduce certain costs of the tax system. This paper articulates different notions of double dividend and examines the theoretical and empirical evidence for each. It also connects the double-dividend issue with principles of optimal environmental taxation in a second-best setting. A weak double-dividend claim-that returning tax revenues through cuts in distortionary taxes leads to cost savings relative to the case where revenues are returned lump sum-is easily defended on theoretical grounds and (thankfully) receives wide support from numerical simulations. The stronger versions contend that revenueneutral swaps of environmental taxes for ordinary distortionary taxes involve zero or negative gross costs. Theoretical analyses and numerical results tend to cast doubt on the strong double-dividend claim, although the theoretical case is not air-tight and the numerical evidence is mixed.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF00877495
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