Policy Research

Differential demand response to gasoline taxes and gasoline prices in the U.S

Silvia Tiezzi, Stefano F. Verde

Summary

The highlights of this article include an estimation of demand with information on gasoline excise tax. This article asserts that gasoline taxes affect demand in 2 unique ways and the authors proceed to discuss the implications of their findings with the hope of designing a corrective taxation. The question is how can we find that corrective type of taxation for the private transport sector? The question can be answered as this article gives valuable information, logical data, and statistics to back up the valid comparison between distinct types of gas taxes that affect consumer behavior in measurable procedures. The difference in persistence between the 2 types of variations plays a large role in different demand responses to changes in gasoline taxes.

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Policy Implications

There are different demand responses from a 13.2 cent per gallon tax increase. The 13.2 cent gas tax causes a reduction in demand as opposed to free market forces that increase the price naturally through competition. The question is why is there a difference between market forces creating an increase in gas prices and a state government instituting a tax for price of gas?