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A Carbon Tax of $30 per ton

Summary: We estimate the budgetary and economic effects of a new carbon tax of $30 per ton of emissions, which is enacted on January 1st, 2021, rising by inflation plus 5 percent through 2050.

Table 1. Conventional Budget Estimate, FY2021-2030

Billions of Dollars, Change from Current-Law Baseline

Policy 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021-2030
A carbon tax of $30 per ton 96 136 144 152 161 170 181 192 201 212 1,644

Table 2. Dynamic Macroeconomic Effects

Percent Change from Baseline

Year GDP Capital stock Labor income Hours worked Consumption
2030 0.3% 0.9% 0.3% 0.0% -1.1%
2040 0.9% 2.5% 0.9% 0.1% -1.1%
2050 2.2% 6.1% 2.2% 0.3% -1.1%

Note: Consistent with empirical evidence, the projections above assume that the U.S. economy is 40 percent open and 60 percent closed. Specifically, 40 percent of new government debt is purchased by foreigners.