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Abstract:
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Interest in using gasoline taxes as a gasoline consumption reduction policy has increased. This study asks three questions to help determine how consumer gasoline consumption responds to gas tax increases. First, do consumers curtail consumption in response to a tax? Second, do consumers respond differently to price adjustments in the cost of gasoline due to taxes than they do to price adjustments due to market forces? Lastly, do consumers respond to gas tax increases differently depending upon how they are implemented? In response to these questions this study concludes that: (1) consumers do curtail consumption in response to gas tax increases, (2) do not respond to price increases due to taxes and market forces differently, and (3) do curtail consumption more in response to larger rate increases than smaller ones. |