The determinants of state gasoline taxation in the 1970s

Abstract

The extent to which state governments consider both allocative issues (pollution, congestion and wear and tear on the highways) and distributive issues (the effect on tax shares of oil producers, trucking interests and non-drivers) in the setting of gasoline taxes is examined. Standard tests of regression coefficients indicate that both the distributive and allocative issues are important. Statistical comparisons of residuals from simulations indicate that the hypothesis that governments adjust taxes systematically cannot be rejected, but that the hypothesis that taxes are set randomly or capriciously can be rejected with high confidence. The estimates can be used to calculate the value of pollution reduction implicit in gasoline tax policy.