There is growing public and media interest in policies to tax carbon. Whether this growing interest is based on environmental concerns, desires for new revenue sources, or dissatisfaction with inefficient regulation, it is paramount that any policy targeting carbon emissions be designed to improve economic efficiency.
A properly designed carbon tax system would not only reduce carbon emissions, but also promote economic growth while minimizing the burden borne by those disproportionally affected.
This paper lays out the case for adopting a revenue-neutral carbon tax in which resulting revenue could be used to reduce the payroll tax rate; finance innovative private savings accounts on top of Social Security; finance other targeted pro-growth Social Security reforms; or shore up the Social Security system by devoting the revenue to the Trust Funds.