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Title: Environmental tax reform with vertical tax externalities
Authors: Saveyn, Bert
Proost, Stef
Issue Date: 2005
Publisher: K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
Series Title: CES - Discussion Paper Series (DPS) 05.14 pages:1-23
Abstract: The paper studies a regional environmental tax reform in a federal state. A region unilaterally improves the environmental quality by increasing its energy taxes. The regional government recycles the excess tax revenues by lowering either pre-existing distorting labor or capital taxes. This regional tax reform causes a vertical tax externality in the federal budget. We show how the nature of this externality depends on the environmental goal, the tax-recycling scenario, the initial local and federal tax shares, and the relative importance of the reforming region in the federal state. Simulations illustrate the effects for Belgium and US.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Energy, Transport and Environment, Leuven

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