Effects of a Carbon Tax on the Economy and the Environment

The economic impact of taxing CO₂ emissions or fossil fuels would depend on what lawmakers did with the revenues from the tax. Using the revenues to reduce deficits or cut other tax rates would decrease the tax’s total cost to the economy; using the revenues to reduce adverse effects on selected groups would not.

The tax would help reduce U.S. emissions but would have only a modest effect on the Earth’s climate without a worldwide effort.

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An Analysis of the President’s 2014 Budget

Enactment of the President’s proposals would, relative to CBO’s baseline, boost deficits between 2013 and 2015 but reduce them by increasing amounts from 2016 through 2023, CBO and the staff of the Joint Committee on Taxation estimate.

Deficits would total $5.2 trillion between 2014 and 2023, $1.1 trillion less than the cumulative deficit in CBO’s baseline. Debt would also be lower, equaling 70 percent of GDP in 2023, compared to 74 percent in the baseline.

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Updated Budget Projections: Fiscal Years 2013 to 2023

CBO expects that rising revenues and a drop in outlays will help lower the deficit to $642 billion (4 percent of GDP) in 2013 and that, under current law, the deficit will continue to shrink through 2015.

But even with revenues above their 40-year average as a share of the economy, deficits will increase later in the decade, mostly because of the pressures of an aging population, rising health care costs, and increasing interest payments.

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A Description of the Immigrant Population—2013 Update

Following a long decline in immigration, the share of the population in the United States composed of the foreign born has increased rapidly since 1970, reaching about 13 percent in the past few years.

About 40 million foreign-born people now live in the United States.

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Modifying Mortgages Involving Fannie Mae and Freddie Mac: Options for Principal Forgiveness

CBO examined three options for Fannie Mae and Freddie Mac—the two government-sponsored enterprises that own or guarantee more than half of the outstanding residential mortgages—to use principal forgiveness to assist certain borrowers. CBO finds that those options would probably:

• Result in small savings to the government,
• Slightly reduce mortgage foreclosure and delinquency rates, and
• Slightly boost overall economic growth.

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