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Tax shifting is not 'win-win' : the employment-related equity impacts of ecological fiscal reform Montgomery, Barbara

Abstract

Ecological fiscal reform (EFR) is a policy that is usually framed as shifting taxes from "goods" (like investment or labour) onto "bads" (like pollution). It is commonly asserted to result in a 'double-dividend'. The first dividend refers to achieving environmental objectives; the second dividend refers to an increase in employment. It is generally thought that this 'win-win' outcome will automatically come about through the efficient workings of the invisible hand of the market. In this thesis I evaluate the employment-related equity impacts of shifting taxes from labour to carbon emitting activities. The direct ecological steering effect of EFR is also discussed but is given less emphasis than equity concerns. This is because I think that sustainable development policies that create or make worse inequality among humans will reduce the efficacy of ecological goals of such policies over the long-term (i.e. equity is necessary because inequity tends to exacerbate environmental degradation). I look at both theoretical and empirical conclusions from the literature on the employment impacts of a tax shift. I evaluate the likelihood of the employment dividend and the conditions required for it to occur, in addition to adding identities to economic scenarios to evaluate distributional impacts. Dominant discourse on the subject is critically analyzed to draw further conclusions about potential employment-related equity impacts of EFR. I conclude that 'win-win' is not guaranteed; the market will not automatically bring about a fair distribution of costs of this policy initiative. Environmentally motivated policy choices must be accompanied by socially enlightened ones if we are to achieve enduring improvement in ecological health.

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