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Distributional effects of congestion charges and fuel taxes

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  • Eliasson, Jonas

Abstract

A common argument against car use taxes, such as congestion charges and fuel taxes, is that they hurt poor groups disproportionately. This chapter discusses this argument, explains methodological issues in distributional analyses and summarizes typical empirical findings. How distributional effects of a car use tax should be viewed depends on whether the purpose of the tax is fiscal or price-correcting (i.e. intended to make the cost of driving better reflect social costs). Overall, average payments of car use taxes tend to be approximately proportional to income, with a small tendency to regressivity in rich countries and progressivity in poor countries. However, there may substantial variation within an income group, which may be problematic if a tax primarily has a fiscal purpose. Distributional analyses of public revenue sources and public spending should in general be kept separate, since the definitions of what constitutes distributional neutrality often differ between taxes and expenditures.

Suggested Citation

  • Eliasson, Jonas, 2019. "Distributional effects of congestion charges and fuel taxes," MPRA Paper 94328, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:94328
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    File URL: https://mpra.ub.uni-muenchen.de/94328/1/MPRA_paper_94328.pdf
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    References listed on IDEAS

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    1. repec:spo:wpecon:info:hdl:2441/10084 is not listed on IDEAS
    2. Eliasson, Jonas, 2016. "Is congestion pricing fair? Consumer and citizen perspectives on equity effects," Transport Policy, Elsevier, vol. 52(C), pages 1-15.
    3. Arze del Granado, Francisco Javier & Coady, David & Gillingham, Robert, 2012. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," World Development, Elsevier, vol. 40(11), pages 2234-2248.
    4. Agostini, Claudio A. & Jiménez, Johanna, 2015. "The distributional incidence of the gasoline tax in Chile," Energy Policy, Elsevier, vol. 85(C), pages 243-252.
    5. Blackman, Allen & Osakwe, Rebecca & Alpizar, Francisco, 2010. "Fuel tax incidence in developing countries: The case of Costa Rica," Energy Policy, Elsevier, vol. 38(5), pages 2208-2215, May.
    6. Casler, Stephen D. & Rafiqui, Aisha, 1993. "Evaluating Fuel Tax Equity: Direct and Indirect Distributional Effects," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 197-205, June.
    7. Eliasson, Jonas & Pyddoke, Roger & Swärdh, Jan-Erik, 2018. "Distributional effects of taxes on car fuel, use, ownership and purchases," Economics of Transportation, Elsevier, vol. 15(C), pages 1-15.
    8. Sterner, Thomas, 2012. "Distributional effects of taxing transport fuel," Energy Policy, Elsevier, vol. 41(C), pages 75-83.
    9. Antonio M. Bento & Lawrence H. Goulder & Emeric Henry & Mark R. Jacobsen & Roger H. von Haefen, 2005. "Distributional and Efficiency Impacts of Gasoline Taxes: An Econometrically Based Multi-market Study," American Economic Review, American Economic Association, vol. 95(2), pages 282-287, May.
    10. Casler, Stephen D. & Rafiqui, Aisha, 1993. "Evaluating Fuel Tax Equity: Direct and Indirect Distributional Effects," National Tax Journal, National Tax Association, vol. 46(2), pages 197-205, June.
    11. Georgina Santos & Laurent Rojey, 2004. "Distributional impacts of road pricing: The truth behind the myth," Transportation, Springer, vol. 31(1), pages 21-42, February.
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    More about this item

    Keywords

    concentration index; congestion charges; distributional effects; equity; fuel tax; Suits index;

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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