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$2.00 Gas! Studying the effects of a gas tax moratorium

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  • Doyle Jr., Joseph J.
  • Samphantharak, Krislert
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    Abstract

    There are surprisingly few estimates of the effects of sales taxes on retail prices, especially at the firm level. We consider the temporary suspension, and subsequent reinstatement, of the gasoline sales tax in Illinois and Indiana following a price spike in 2000. Earlier laws set the timing of the reinstatements, providing plausibly exogenous changes in the tax rates. Using a unique dataset of daily prices at the gas-station level, 70% of the tax suspension is passed on to consumers in the form of lower prices, while 80-100% of the tax reinstatements are passed on to consumers. Some evidence suggests that these short-run pass-through estimates are smaller near the state borders, with the tax reinstatements associated with relatively higher prices up to an hour's drive into neighboring states.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 92 (2008)
    Issue (Month): 3-4 (April)
    Pages: 869-884

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    Handle: RePEc:eee:pubeco:v:92:y:2008:i:3-4:p:869-884

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    Web page: http://www.elsevier.com/locate/inca/505578

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    Cited by:
    1. Li, Shanjun & Linn, joshua & Muehlegger, Erich J., 2012. "Gasoline Taxes and Consumer Behavior," Scholarly Articles 8506866, Harvard Kennedy School of Government.
    2. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
    3. Brian Knight & Nathan Schiff, 2012. "Spatial Competition and Cross-Border Shopping: Evidence from State Lotteries," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 4(4), pages 199-229, November.
    4. Lucas W. Davis & Lutz Kilian, 2011. "Estimating the effect of a gasoline tax on carbon emissions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1187-1214, November.
    5. Marina Di Giacomo & Massimiliano Piacenza & Gilberto Turati, 2009. "Are "Flexible" Taxation Mechanisms Effective in Stabilizing Fuel Prices? An Evaluation Considering the Italian Fuel Markets," Working papers, Former Department of Economics and Public Finance "G. Prato", University of Torino 7, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    6. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 225-234.
    7. Claudio Agostini, 2009. "Incidencia Tributaria en el Mercado de las Gasolinas en Chile," ILADES-Georgetown University Working Papers, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines inv223, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    8. Madowitz, M. & Novan, K., 2013. "Gasoline taxes and revenue volatility: An application to California," Energy Policy, Elsevier, vol. 59(C), pages 663-673.

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