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Geography, income, and the incidence of a Massachusetts carbon tax

Author

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  • Sayre, Susan Stratton

Abstract

I use spatial microsimulation to estimate the geographic incidence of the consumer-facing portion of various revenue-neutral carbon tax designs in Massachusetts. I identify a substantial urban-rural disparity in impacts that is reduced, but not eliminated, by proposed revenue-targeting mechanisms. I further demonstrate that seemingly small variations in the definition of rural households can have substantial impacts on urban-rural equity and the distribution of gains and losses. Proposed policies are highly progressive in the aggregate with most low-income households receiving more in rebates than they pay in taxes, but notable numbers of low-income households are likely to experience significant losses. Methodologically, I improve upon related work, by considering the full distribution of possible effects that each household might experience and demonstrate the importance of this approach. Politically, I find that Democratic-held districts fare better under all policy variations. There are noticeable trade-offs between policies aimed at improving median outcomes in each district and those designed to minimize the number of households facing significant financial losses within each district.

Suggested Citation

  • Sayre, Susan Stratton, 2026. "Geography, income, and the incidence of a Massachusetts carbon tax," Journal of Environmental Economics and Management, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:jeeman:v:137:y:2026:i:c:s0095069626000161
    DOI: 10.1016/j.jeem.2026.103296

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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