The Taxation of Fuel Economy

No 16466, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Policy-makers have instituted a variety of fuel economy tax policies -- polices that tax or subsidize new vehicle purchases on the basis of fuel economy performance -- in the hopes of improving fleet fuel economy and reducing gasoline consumption. This article reviews existing policies and concludes that while they do work to improve vehicle fuel economy, the same goals could be achieved at a lower cost to society if policy-makers instead directly taxed fuel. Fuel economy taxation, as it is currently practiced, invites several forms of gaming that could be eliminated by policy changes. Thus, even if policy-makers prefer fuel economy taxation over fuel taxes for reasons other than efficiency, there are still potential efficiency gains from reform.

JEL-codes: H23 (search for similar items in EconPapers)
Date: 2010-10
Note: EEE PE
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Citations: View citations in EconPapers (18)

Published as James M. Sallee, 2011. "The Taxation of Fuel Economy," Tax Policy and the Economy, University of Chicago Press, vol. 25(1), pages 1 - 38.
Published as The Taxation of Fuel Economy , James M. Sallee. in Tax Policy and the Economy, Volume 25 , Brown. 2011

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Journal Article: The Taxation of Fuel Economy (2011)
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