Efficiency and Equity of an Outdoor Recreation Equipment Tax to Fund Public Lands

U.S. national parks and other public lands have large deferred maintenance backlogs and a need for more sustainable annual funding streams. Some observers have suggested that dedicated funding sources outside of general revenues would improve the situation. In this study, we analyze the efficiency and equity implications of one often-proposed option, a federal excise tax on outdoor recreation equipment. Using micro-data on consumer expenditures, we estimate a two-stage Quadratic Almost Ideal Demand System (QUAIDS) for recreation equipment and use the model to simulate the impacts of a 5 percent tax. We find that the demand for outdoor gear is price-elastic, but the tax generates a relatively modest welfare loss as a share of tax revenues raised—$0.04 for every $1 of revenue. An average household would pay only about $12 per year in taxes, and an estimated $4.6 billion in revenues would be generated annually for public lands. We find that the tax is nearly proportional to income, across the entire income distribution, but households in the lowest income quintile pay substantially more as a share of income, on average, than households in the other four income quintiles.