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How should heavy-duty trucks be taxed?

  • Parry, Ian W.H.

This paper develops and implements an analytical framework for estimating optimal taxes on the fuel use and mileage of heavy-duty trucks in the United States, accounting for external costs from congestion, accidents, pavement damage, noise, energy security, and local and global pollution. The analysis allows for endogenous fuel economy, increased auto travel in response to reduced truck congestion, and distinguishes driving by truck type and region. We estimate the optimal (second-best) diesel fuel tax at $1.12 per gallon and implementing it increases welfare by $1.34 billion per annum. Optimizing over both fuel and mileage taxes, and differentiating mileage taxes by vehicle type and region, yields progressively higher welfare gains. The most efficient tax structure involves a diesel fuel tax of 69 cents per gallon and charges on trucks that vary between 7 and 33 cents per mile; implementing this tax structure yields estimated welfare gains of $2.06 billion.

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

Volume (Year): 63 (2008)
Issue (Month): 2 (March)
Pages: 651-668

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Handle: RePEc:eee:juecon:v:63:y:2008:i:2:p:651-668
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
  2. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  3. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  4. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
  5. Inge Mayeres & Kurt Van Dender, 2001. "The external costs of transport," Chapters, in: Reforming Transport Pricing in the European Union, chapter 7 Edward Elgar.
  6. CALTHROP, Edward & DE BORGER, Bruno & PROOST, Stef, . "Externalities and partial tax reform: Does it make sense to tax road freight (but not passenger) transport?," Working Papers 2006017, University of Antwerp, Faculty of Applied Economics.
  7. Dahl, Carol A., 1993. "A survey of energy demand elasticities in support of the development of the NEMS," MPRA Paper 13962, University Library of Munich, Germany.
  8. Richard S.J. Tol & Samuel Fankhauser & Richard G. Richels & Joel B. Smith, 2000. "How Much Damage Will Climate Change Do? Recent Estimates," Working Papers FNU-2, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2000.
  9. Edward Calthrop & Bruno De Borger & Stef Proost, 2003. "Tax reform for dirty intermediate goods: theory and an application to the taxation of freight transport," Energy, Transport and Environment Working Papers Series ete0302, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  10. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
  11. Inge Mayeres & Denise Van Regemorter, 2003. "Modelling the health related benefits of environmental policies - a CGE analysis for the eu countries with gem-e3," Energy, Transport and Environment Working Papers Series ete0310, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  12. Parry, Ian W H & Bento, Antonio, 2001. " Revenue Recycling and the Welfare Effects of Road Pricing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 645-71, December.
  13. Small, K. & Winston, C., 1998. ""The Demand for Transportation: Models and Applications"," Papers 98-99-6, California Irvine - School of Social Sciences.
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