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Author(s)

David Besanko

Saahil Malik

Vidhyashankar Balasubramanian

Although the federal gasoline tax played multiple roles in financing surface transportation infrastructure in the United States, experts did not agree on the tax's purpose. Some argued that it was essentially a fee for users of the nation's federally supported highways. Others suggested that it should play a more prominent role in environmental, energy, and transportation policy by correcting for driving-related externalities. Still others suggested that it should be used to reduce the federal budget deficit. Finally, the tax itself had remained at the same level since 1993, and with the Highway Trust Fund virtually insolvent, many experts believed it was time for an increase. The case presents a background on the U.S. federal gasoline tax, an overview of the market for gasoline in the United States, and survey of gasoline taxes in U.S. states as well as several other countries around the world.

Date Published: 01/28/2011
Discipline: Economics
Key Concepts: Gasoline Tax, Motor Fuel Tax, Price Elasticity of Demand, Price Elasticity of Supply, Supply, Demand, Externalities, Excise Tax, Pigouvian Tax
Citations: Besanko, David, Saahil Malik, Vidhyashankar Balasubramanian. The U.S. Gasoline Tax: Time for a Change. 5-409-751 (KEL517).