The Distributive Effects of the Federal Energy Tax Act
- Creators
- Dubin, Jeffrey A.
- Henson, Steven E.
Abstract
This paper examines the distributional consequences of the tax credits implemented by the Federal Energy Tax Act of 1978. The distributional effects are of interest both for their own sake, and because they have implications for the cost-effectiveness of the credits. If rates of return to conservation are higher for individuals who consume less housing, as earlier evidence suggests, then conservation incentive programs can achieve larger benefits for a given cost if they are distributionally more progressive. We explain the amount of credit claimed by taxpayers using a tobit model, in which credits claimed are a function of variables that affect the net benefit of weatherization. We estimate the model using data from the 1979 Taxpayer Compliance Measurement Program conducted by the Internal Revenue Service. We find that credits claimed are significantly higher where winters are more severe, where energy prices are high or rising rapidly, and where individuals have higher incomes and spend more on housing. Progressivity indices based on Lorenz-Gini measures of inequality reveal that the tax credits were somewhat regressive, even holding climate and energy prices constant. This suggests that the credits may have been ineffectively targeted. In addition, we find no evidence that the credits had a measurable incentive effect, suggesting that they have largely provided windfall gains to households who would have insulated anyway.
Additional Information
We would like to thank Bill Lefbom for help in acquiring the data. The helpful comments of Louis Wilde, David Hedrick, and the editor are gratefully acknowledged. Financial assistance was provided by the Exxon Foundation through the California Institute of Technology Environmental Quality Laboratory. Sandie Ellis provided valuable research assistance. All remaining errors are our own.Attached Files
Submitted - sswp674.pdf
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Additional details
- Eprint ID
- 81205
- Resolver ID
- CaltechAUTHORS:20170906-143432906
- Created
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2017-09-06Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 674