The Macroeconomic Impact of Carbon Tax Collection Under Tax Neutrality Constraints

Abstract

Levying a carbon tax is the main path to achieving the "dual carbon" goal, but implementing a carbon tax policy will have a negative impact on the macro economy. This article constructs a static CGE model, with tax neutrality as the premise, to simulate the impact of carbon tax collection on the macro economy under different policy scenarios. The results indicate that imposing a carbon tax and reducing other taxes to maintain tax neutrality can alleviate the adverse effects on the macro economy. Among them, collecting carbon tax and reducing value-added tax can effectively alleviate the decline of GDP and added value of the secondary industry, and drive the increase of total domestic investment; Levying carbon tax and reducing value-added tax can effectively control the rise of CPI; Levying carbon tax and reducing Personal income tax can increase EV of residents' welfare. Finally, this article proposes countermeasures and suggestions: 1. Adopting a tiered carbon tax implementation strategy to achieve emission reduction goals. 2. Establish a horizontal transfer payment system for carbon tax revenue between provinces to coordinate the balanced development of various provinces in China. 3. Coordinate carbon tax and Carbon emission trading, and avoid overlapping of carbon tax and Carbon emission trading.