The Optimal Gas Tax for California

This paper calculates the optimal gasoline tax for the state of California. According to the analysis, the optimal gasoline tax in California is $1.37 per gallon, which is more than three times the current California tax when excluding sales taxes. The Pigovian tax is the largest part of this tax, comprising $0.85 per gallon, and it addresses three objectives: environmental protection; reduction of traffic congestion and traffic-related accidents; and reduction in dependence on foreign energy supplies. The congestion externality is taxed the most heavily, at $0.27, followed by oil security, accident externalities, local air pollution, and finally global climate change. The other major component, a Ramsey tax, comprises a full $0.52 of this tax, reflecting the efficiency in raising revenues from a tax on gasoline consumption due to the inelastic demand of this consumption good. Revenue raised on a gasoline tax could be used to offset income taxes to address regressivity or to fund research into new and alternative energy sources.

Language

  • English

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: 44p

Subject/Index Terms

Filing Info

  • Accession Number: 01159521
  • Record Type: Publication
  • Source Agency: UC Berkeley Transportation Library
  • Report/Paper Numbers: UCD-ITS-RP-10-03
  • Files: BTRIS, TRIS
  • Created Date: Apr 30 2010 2:54PM