I left a comment over at M1EK's Bake Sale of Bile awhile back. It was motivateed by the conclusion to The Gas Tax Isn't Regressive, Part Three:
This is timely because of a current thread on Environmental Economics on this very subject. Amazingly, I've now provided THREE links which are credible and contain supporting evidence for the claim that the gas tax isn't regressive across-the-board; for the most part blind assertion is still the only support for the 'regressive' position. Moral: Conventional Wisdom is hard to fight, even when it's wrong.
Here is my comment:
Here is a study that shows the gas tax is regressive: Estimates from a Consumer Demand System: Implications for the Incidence of Environmental Taxes, by West and Williams, Journal of Environmental Economics and Management, May 2004.
It finds a result similar to this:
"A tax on gasoline is not regressive across the lowest incomes but is regressive from middle to high incomes."
Those in the lowest incomes are not in the gas market because they don't have cars. Therefore, gas taxes are regressive for those in the market. That's one definition of regressivity.
A problem is that car ownership is one of those variables that helps low-income people increase their incomes. For example, if you don't have a car it is tougher to get to work at various places, tougher to find better employment, tougher to work and take your kids to daycare, etc.
So, excluding them from the definition of regressivity seems like circular logic.
Here is the response from M1EK:
Note that the typical way regressivity is measured is not across the market, but across all incomes. Thus, your argument that poor people who don't drive shouldn't count in the measure of the tax's regressivity is foolish. And, frankly, it doesn't surprise me that somebody who lives in such a car-dependent area views being without a car as an unmitigated negative - for you, it clearly would be. It would be nearly impossible to be economically productive in Boone without a car.
The same thing is definitely NOT true in major cities all over this country, though. In fact, freeing poor people from the necessity of owning a car in order to acquire employment is a huge POSITIVE in those cities, as seen by the various studies that show that in the most car-dependent cities, people actually spend as much or more on transportation as they do on housing.
Again, without redefining "regressive" in a way which seems inappropriate, you can't get away from the fact that even in this country, many poor people don't drive (don't HAVE to) and many more drive a lot less than your typical exurbanite SUV owner. That's why the gas tax is not regressive across the spectrum.
And a comment from Rob Williams, co-author of the JEEM paper:
John Whitehead mentioned my paper with Sarah West, but didn't mention one of the main points of the paper: the results depend a lot on how you use the gas tax revenue. By itself, the gas tax is (mildly) regressive. But as we show in the paper, you can easily use the revenue in ways that would make the gas tax highly progressive (by using that revenue to finance cuts in really regressive taxes, for example).
Right now, gas tax revenues aren't used that way. But there's no reason that has to be true. The additional revenue from a gas tax increase doesn't have to be used in exactly the same way that we currently use gas tax revenue.
Actually, I had mentioned this part of the argument in a comment to M1EK at ENV-ECON but I was rude about it so I deleted it, after apologizing to M1EK in an email (and consider this the public apology). Tim can back me up:
- I did mention the part about fixing the gas tax's regressivity
- I was rude
So, Rob, sorry that I didn't tell the whole story.
And this is why the regressive nature of a gas tax should not be an argument against it. An increase in the gas tax should be regarded as environmental policy. And environmental policy, just like trade policy, is a terribly inefficient place to try to right the wrongs of the income distribution. If you think the wrongs of the income distribution should be righted, head straight for the income tax.
