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Could gas tax combined with VMT tax be effective during the transition?

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  • Cheon, Jiyeon

Abstract

This paper examines three tax types aimed at enhancing social welfare in light of the increasing penetration of electric vehicles in the United States: gasoline tax, vehicle miles traveled (VMT) tax, and a combined tax comprising both gasoline and VMT taxes. The model developed in this study reveals that the second-best optimal tax rates for a flat VMT tax and a combined tax, when converted to cents per gallon, surpass the second-best optimal gas tax rate. Despite this, both rates demonstrate a capacity to enhance social welfare to a greater extent than the gas tax alone. During the initial phase of electric vehicle integration, the flat combined tax emerges as the sole revenue-neutral option delivering positive welfare benefits.

Suggested Citation

  • Cheon, Jiyeon, 2025. "Could gas tax combined with VMT tax be effective during the transition?," Transport Policy, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:trapol:v:174:y:2025:i:c:s0967070x25003853
    DOI: 10.1016/j.tranpol.2025.103842
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    References listed on IDEAS

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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • P0 - Political Economy and Comparative Economic Systems - - General
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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