Lance Wallace writes in Tips and Notes:
The Congressional Budget Office has released an analysis of the effects of a carbon tax.
At $20 a ton. they estimate about $1.2 trillion in revenues over a 10-year period. A money quote for me is:
“Without accounting for how the revenues from a carbon
tax would be used, such a tax would have a negative effect
on the economy. The higher prices it caused would
diminish the purchasing power of people’s earnings,
effectively reducing their real (inflation-adjusted) wages.
Lower real wages would have the net effect of reducing
the amount that people worked, thus decreasing the overall
supply of labor. Investment would also decline, further
reducing the economy’s total output.”
The CBO goes on to soften this by saying that certain ways of spending the revenue (e.g., reducing deficits or marginal tax rates) might result in a net benefit. But just returning the revenues to the low-income homes most affected by the rise in cost of electricity (16%; range 7% (California) to 27% (Illinois, West VA, etc.)) would not decrease the total cost of the carbon tax.