The use of the revenue is another subject of debate in carbon tax proposals. A government may use revenue to increase its discretionary spending, or address deficits. However, such proposals often run the risk of being regressive, and sparking backlash among the public due to an increased cost of energy associated with such taxes. To avoid this and increase the popularity of a carbon tax, a government may make the carbon tax revenue-neutral. This can be done by reducing income tax proportionate to the level of the carbon tax, or by returning carbon tax revenues to citizens as a dividend.
The use of the revenue is another subject of debate in carbon tax proposals A government may use revenue to increase its discretionary spending or address deficits However such proposals often run the risk of being regressive and sparking backlash among the public due to an increased cost of energy associated with such taxes To avoid this and increase the popularity of a carbon tax a government may make the carbon tax revenue-neutral This can be done by reducing income tax proportionate to the level of the carbon tax or by returning carbon tax revenues to citizens as a dividend