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Distributional Impacts of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes

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  • Walls, Margaret

    ()
    (Resources for the Future)

  • Hanson, Jean

Abstract

One of the most common criticisms of pollution taxes is that they are often believed to be inequitable — i.e., low income households are thought to be disproportionately harmed. In this paper, we assess the distributional impacts of three taxes aimed at reducing emissions from motor vehicles: (i) a tax on total annual emissions, (ii) a tax on emissions rates (in grams per mile), and (iii) a tax on annual miles traveled. We use two alternative measures of economic well-being, annual household income and a constructed measure of lifetime income. We find that all three fees look regressive, both on the basis of annual and lifetime income — though much less so on a lifetime income basis. However, if one of these fees is used to substitute for existing vehicle registration fees, the differential impacts over existing fees are quite small: on a lifetime income basis, the mileage-based fee looks almost identical to the current system, while the total emissions fee is a little more regressive and the emissions rate-based fee slightly more regressive still than the current system. These results highlight the importance of tax shifting to help the environment.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-96-11.

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Date of creation: 01 Jan 1996
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Handle: RePEc:rff:dpaper:dp-96-11

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  1. Shladover, Steven E., 1993. "Potential contributions of intelligent vehicle/ highway systems (IVHS) to reducing transportation's greenhouse gas production," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(3), pages 207-216, May.
  2. Lawrence H. Goulder, 1994. "Environmental Taxation and the "Double Dividend:" A Reader's Guide," NBER Working Papers 4896, National Bureau of Economic Research, Inc.
  3. James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
  4. Stephen Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 24-85, Wharton School Rodney L. White Center for Financial Research.
  5. James M. Poterba, 1991. "Is the Gasoline Tax Regressive?," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 145-164 National Bureau of Economic Research, Inc.
  6. Lave, Charles, 1994. "State and National VMT Estimates: It Ain't Necessarily So," University of California Transportation Center, Working Papers qt5527j8dj, University of California Transportation Center.
  7. Rogers, D.L., 1993. "Measuring the Distributional Effects of Corrective Taxation," Papers 12-93-1, Pennsylvania State - Department of Economics.
  8. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-52, September.
  9. Small, Kenneth A. & Kazimi, Camilla, 1995. "On the Costs of Air Pollution from Motor Vehicles," University of California Transportation Center, Working Papers qt0sx81025, University of California Transportation Center.
  10. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
  11. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
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Cited by:
  1. Garrone Giovanna, 2004. "Scrapping old cars for reducing air pollution: an environmental evaluation of the Italian 1997-1998 incentive policy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200404, University of Turin.
  2. Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2009. "Fuel Tax Incidence in Developing Countries: The Case of Costa Rica," Discussion Papers dp-09-37, Resources For the Future.
  3. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
  4. James R. Hines Jr., 2007. "Taxing Consumption and Other Sins," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 49-68, Winter.
  5. Albrecht, Johan, 2006. "The use of consumption taxes to re-launch green tax reforms," International Review of Law and Economics, Elsevier, vol. 26(1), pages 88-103, March.
  6. Johnstone, Nick & Alavalapati, Janaki R.R., 1998. "The Distributional Effects of Environmental Tax Reform," Discussion Papers 24140, International Institute for Environment and Development, Environmental Economics Programme.
  7. Wier, Mette & Birr-Pedersen, Katja & Jacobsen, Henrik Klinge & Klok, Jacob, 2005. "Are CO2 taxes regressive? Evidence from the Danish experience," Ecological Economics, Elsevier, vol. 52(2), pages 239-251, January.
  8. Ian W.H. Parry & Hilary Sigman & Margaret Walls & Roberton C. Williams III, 2005. "The Incidence of Pollution Control Policies," NBER Working Papers 11438, National Bureau of Economic Research, Inc.
  9. Seth Shonkoff & Rachel Morello-Frosch & Manuel Pastor & James Sadd, 2011. "The climate gap: environmental health and equity implications of climate change and mitigation policies in California—a review of the literature," Climatic Change, Springer, vol. 109(1), pages 485-503, December.
  10. West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
  11. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2008. "The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit," Discussion Papers dp-08-28, Resources For the Future.
  12. Tomohara, Akinori & Xue, Jian, 2009. "Motorcycles retirement program: Choosing the appropriate regulatory framework," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 126-129.
  13. Don Fullerton, 2008. "Distributional Effects of Environmental and Energy Policy: An Introduction," NBER Working Papers 14241, National Bureau of Economic Research, Inc.
  14. Hickson, Allister, 2006. "Motor vehicle insurance rating with pseudo emissions coverage," Ecological Economics, Elsevier, vol. 58(1), pages 146-159, June.

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