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Is The Gasoline Tax Regressive?

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  • POTERBA, J.M.

Abstract

Claims of the regressivity of gasoline taxes typically rely on annual surveys of consumer income and expenditures which show that gasoline expenditures are a larger fraction of income for very low income households than for middle or high-income households. This paper argues that annual expenditure provides a more reliable indicator of household well-being than annual income. It uses data from the Consumer Expenditure Survey to reassess the claim that gasoline taxes are regressive by computing the share of total expenditures which high-spending and low-spending households devote to retail gasoline purchases. This alternative approach shows that low?expenditure households devote a smaller share of their budget to gasoline than do their counterparts in the middle of the expenditure distribution. Although households in the top five percent of the total spending distribution spend less on gasoline than those who are less well-off, the share of expenditure devoted to gasoline is much more stable across the population than the ratio of gasoline outlays to current income. The gasoline tax thus appears far less regressive than conventional analyses suggest.

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Bibliographic Info

Paper provided by Massachusetts Institute of Technology (MIT), Department of Economics in its series Working papers with number 568.

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Length: 29 pages
Date of creation: 1990
Date of revision:
Handle: RePEc:mit:worpap:568

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: (617) 253-3361
Fax: (617) 253-1330
Web page: http://econ-www.mit.edu/
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), DEPARTMENT OF ECONOMICS, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
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Keywords: income ; household ; economic indicators;

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References

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  1. Cordes, Joseph J. & Nicholson, Eric & Sammartino, Frank, 1990. "Raising Revenue by Taxing Activities with Social Costs," National Tax Journal, National Tax Association, vol. 43(3), pages 343-56, September.
  2. James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
  3. Carol A. Dahl, 1986. "Gasoline Demand Survey," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 67-82.
  4. Davies, James B & St-Hilaire, France & Whalley, John, 1984. "Some Calculations of Lifetime Tax Incidence," American Economic Review, American Economic Association, American Economic Association, vol. 74(4), pages 633-49, September.
  5. Kahn, James A, 1986. "Gasoline Prices and the Used Automobile Market: A Rational Expectations Asset Price Approach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(2), pages 323-39, May.
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