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Should Fuel Taxes Be Scrapped in Favor of Per-Mile Charges?

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  • Parry, Ian

    (Resources for the Future)

Abstract

This paper discusses the appropriate balance between traditional gasoline taxes and charging by the mile, focusing mainly on economic efficiency considerations. We begin with a brief discussion of the five major passenger vehicle externalities of concern - local pollution, greenhouse warming, oil dependency, traffic congestion, and traffic accidents - summarizing evidence on the dollar value of the externalities for passenger vehicles in the United States. We then discuss how much fuel taxation might be justified to account for these externalities, as well as how much taxation might be appropriate on fiscal grounds, assuming per-mile charges are unavailable. Finally, we discuss to what extent fuel taxation should be replaced with per-mile charges.

Suggested Citation

  • Parry, Ian, 2005. "Should Fuel Taxes Be Scrapped in Favor of Per-Mile Charges?," RFF Working Paper Series dp-05-36, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-05-36
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-05-36.pdf
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    References listed on IDEAS

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    1. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(3), pages 362-384.
    2. Sarah E. West & Roberton C. Williams, 2004. "Empirical Estimates for Environmental Policy Making in a Second-Best Setting," NBER Working Papers 10330, National Bureau of Economic Research, Inc.
    3. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    4. Lawrence H. Goulder & Ian W.H. Parry & Dallas Burtraw, 2002. "Revenue-Raising versus Other Approaches to Environmental Protection: The Critical Significance of Preexisting Tax Distortions," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 24, pages 447-470, Edward Elgar Publishing.
    5. Lawrence H. Goulder & Ian W. H. Parry & Dallas Burtraw, 1996. "Revenue-Raising vs. Other Approaches to Environmental Protection: The Critical Significance of Pre-Existing Tax Distortions," NBER Working Papers 5641, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Lin, C.-Y. Cynthia & Prince, Lea, 2009. "The optimal gas tax for California," Energy Policy, Elsevier, vol. 37(12), pages 5173-5183, December.
    2. Hahn, Robert & Passell, Peter, 2010. "The economics of allowing more U.S. oil drilling," Energy Economics, Elsevier, vol. 32(3), pages 638-650, May.

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    More about this item

    Keywords

    gasoline tax; mileage tax; motor vehicle externalities; fiscal interactions;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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