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The Political Economy of Motor-Fuel Taxation

Author

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  • Rajeev K. Goel
  • Michael A. Nelson

Abstract

This paper examines the political and economic underpinnings of gasoline tax policy. The theoretical model extends the earlier work of Hettich and Winer (1988) to flush out the effect of a change in the pre-tax price of a taxable activity on the politically optimal tax rate. Using a large cross-sectional sample of U.S. states over 1960-94, the empirical model tests the predictions of the theoretical model within the context of the state tax policy on gasoline. While simultaneously controlling for other politico-economic influences, we find that the influence of changes in gas prices on tax rates is negative. To our knowledge, this is the first study to include a fully developed theoretical model and its empirical application to the gasoline market for a test of the votemaximizing model of tax policy.

Suggested Citation

  • Rajeev K. Goel & Michael A. Nelson, 1999. "The Political Economy of Motor-Fuel Taxation," The Energy Journal, , vol. 20(1), pages 43-59, January.
    • Handle: RePEc:sae:enejou:v:20:y:1999:i:1:p:43-59
    DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No1-3
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    Cited by:

    1. Epstein, Lucas & Muehlegger, Erich, 2024. "Ideology, Incidence and the Political Economy of Fuel Taxes: Evidence from California 2018 Proposition 6," Institute of Transportation Studies, Working Paper Series qt6k58771s, Institute of Transportation Studies, UC Davis.
    2. Fredriksson, Per G. & Millimet, D.L.Daniel L., 2004. "Comparative politics and environmental taxation," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 705-722, July.
    3. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    4. Parry, Ian & Portney, Paul & Harrington, Winston & Gruenspecht, Howard, 2003. "The Economics of Fuel Economy Standards," RFF Working Paper Series dp-03-44, Resources for the Future.
    5. Scott, K. Rebecca, 2012. "Rational habits in gasoline demand," Energy Economics, Elsevier, vol. 34(5), pages 1713-1723.
    6. Kossov, Vladimir & Kossova, Elena, 2013. "Gasoline price as social phenomenon," MPRA Paper 48720, University Library of Munich, Germany.
    7. Button, Kenneth, 2020. "The Transition From Pigou’S Ideas On Road Pricing To Their Application," Journal of the History of Economic Thought, Cambridge University Press, vol. 42(3), pages 417-438, September.
    8. Hasan Bülent KANTARCI, 2018. "Türkiye’de Akaryakıt Üzerinden Alınan Vergilerin OECD ve AB Ülkeleri ile Karşılaştırılması," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(35).
    9. Claudio A. , Agostini & Johanna, Jiménez, 2012. "La incidencia distributiva del impuesto a las gasolinas en Chile," Estudios Públicos, Centro de Estudios Públicos, vol. 0(126), pages 53-85.
    10. Paul R. Portney & Ian W.H. Parry & Howard K. Gruenspecht & Winston Harrington, 2003. "Policy Watch: The Economics of Fuel Economy Standards," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 203-217, Fall.
    11. Agostini, Claudio A. & Jiménez, Johanna, 2015. "The distributional incidence of the gasoline tax in Chile," Energy Policy, Elsevier, vol. 85(C), pages 243-252.
    12. Julien Daubanes & Lisa Leinert, 2012. "Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline," CER-ETH Economics working paper series 12/163, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    13. Flores, José Luis, 2014. "Políticas climáticas en países desarrollados: impacto en América Latina," Documentos de Proyectos 37611, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. Claudio A., Agostini & Johanna, Jiménez, 2012. "La incidencia distributiva del impuesto a las gasolinas en Chile," Estudios Públicos, Centro de Estudios Públicos, vol. 0(125), pages 53-85.

    More about this item

    Keywords

    gasoline tax; tax policy; US; gasoline prices;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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