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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.

Suggested Citation

  • Walls, Margaret & Hanson, Jean, 1996. "Distributional Impacts of an Environmental Tax Shift: The Case of Motor Vehicle Emissions Taxes," Discussion Papers dp-96-11, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-96-11
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    Cited by:

    1. 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.
    2. Hickson, Allister, 2006. "Motor vehicle insurance rating with pseudo emissions coverage," Ecological Economics, Elsevier, vol. 58(1), pages 146-159, June.
    3. 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.
    4. Ian Parry & Hilary Sigman & Margaret Walls & Roberton Williams, 2005. "The Incidence of Pollution Control Policies," Departmental Working Papers 200504, Rutgers University, Department of Economics.
    5. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, 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. James R. Hines Jr., 2007. "Taxing Consumption and Other Sins," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 49-68, Winter.
    8. 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.
    9. 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.
    10. Don Fullerton, 2008. "Distributional Effects of Environmental and Energy Policy: An Introduction," NBER Working Papers 14241, National Bureau of Economic Research, Inc.
    11. Tomohara, Akinori & Xue, Jian, 2009. "Motorcycles retirement program: Choosing the appropriate regulatory framework," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 126-129.
    12. 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.
    13. 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.
    14. 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.
    15. Kavalec, Chris & Setiawan, Winardi, 1997. "An analysis of per mile pollution fees for motor vehicles in California's south coast," Transport Policy, Elsevier, vol. 4(4), pages 267-273, October.

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