Low-Income Households Laser Talk

How will Carbon Fee and Dividend affect low-income households?

Multiple studies show that returning all the revenue from a carbon tax or fee as carbon dividends leaves a majority of households with more money in their pockets [1, 2, 3]. Furthermore, low-income households benefit the most, with nearly 90% in the poorest fifth of the population coming out ahead [3], and the average household in that quintile coming out more than $1,000 ahead when the carbon fee is $30 per metric ton [1].

Even more strikingly, a recent analysis commissioned by CCL [3] revealed that when the net dollar benefit of the dividend is expressed as percent of household income, the benefit to the average low-income family – almost 1.8% of their annual income – far outweighs the small deficit – only 0.18% – paid by the average high-income household.

Why do low-income households benefit with a carbon dividend?

Although low-income Americans spend a higher fraction of their income on energy, the dollar amounts wealthy households spend on carbon-intensive goods and services more than makeup for it. In fact, the wealthiest 20% of Americans account for about 32% of emissions, while the poorest 20% account for only 9% of emissions [4].

Moreover, our Regional Economic Models, Inc (REMI) study found that Carbon Fee and Dividend would also increase jobs, and the strongest job creation would help the poorest three quintiles [5].

Carbon Fee and Dividend leaves low-income households better off financially, more likely to have a job, and it does this without any costly and complicated means-testing, income group targeting, or income-based subsidization.

  1. Williams, R. C. et al. The Initial Incidence of a Carbon Tax across Income Groups. Resources for the Future. August 2014. PDF available at: http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-14-24.pdf
  2. Dividends spreadsheet model. Carbon Tax Center. Last modified: Oct. 1, 2015. Available at: http://www.carbontax.org/dividends/
  3. Household Impacts Study. Kevin Ummel.
  4. “Ensuring Equity”. Carbon Tax Center. Last modified: June 14, 2014. URL: http://www.carbontax.org/protecting-the-vulnerable/ensuring-equity/
  5. Nystrom, S. and Luckow, P. “The The Economic, Climate, Fiscal, Power, and Demographic Impact of a National Fee-and-Dividend Carbon Tax”. Regional Economic Models, Inc. and Synapse, Inc. for Citizens’ Climate Lobby. June, 2014. Fig 3.22, p. 36. Available at: https://citizensclimatelobby.org/remi-report/

 

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