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May 3, 2008

Clinton, McCain & Obama Gas Tax Roundup

May 3, 2008 in Political News | Permalink

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Comments

I don't think the gas tax holiday is a good idea for incidence and distributional reasons. That said, many of those who support a higher "Pigouvian" gas tax really don't have an efficiency argument against it.

A Pigouvian tax is premised on equating marginal private costs and marginal social costs. The run-up in gas prices over the last couple years has in some cases exceeded the tax many previously felt was necessary to equate private and social costs. That the private cost of gasoline increased due to market price and not a tax does not alter that. Social costs do not go up proportionally with the market price of gas.

For the Pigouvian purpose of equating private and social costs, it doesn't matter whether the "tax" is imposed by government or rent seeking speculators.

Posted by: edh | May 4, 2008 2:21:09 PM

Clinton on ABC This Week commented that she knew that no economist supported the gas tax amnesty. That is covered in the NYT and more humorously at http://drtaxsacto.blogspot.com - An Addendum to Whistling in the Dark.

Posted by: drtaxsacto | May 5, 2008 9:42:36 AM