How should governments use the considerable revenue carbon taxes can raise? This research paper by the Tax Policy Center of the Urban Institute and the Brookings Institution discusses the different options for revenue use and associated trade-offs. The authors recommend that governments use some revenue to reduce other taxes to soften the blow to lower-income households, coal workers, and their communities. They also recommend that governments are cautious about using revenues to pursue emission reductions the tax itself encourages, avoid tight earmarks and pay special attention to using revenue in ways that attract and sustain stakeholder and public support for a carbon tax.
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