Carbon Tax Heuristics and Politics: The Case of the Gasoline Tax
23 Pages Posted: 16 Apr 2008
Date Written: April 15, 2008
Economists are beginning to form a consensus that the most effective and cost-effective way to reduce global greenhouse gas emissions is through a carbon tax. The insight of economists and other policy analysts is that in the greenhouse gas context, the design of cap-and-trade programs creates so many opportunities for rent-seeking that they may not be very cost-effective, and may not reduce greenhouse gas emissions at all. The appeal of carbon tax proposals is that they are so simple and sensible that rent-seeking would have to be very audacious to succeed.
Carbon tax proposals, however, have divided economists from almost everybody else. In particular, an exceptionally effective and efficient carbon tax, the gasoline tax, has been even more unanimously supported by economists and even more virulently opposed by almost everyone else. This Article explores some of the psychological barriers to public acceptance of gasoline tax increases, and also examines a political economy theory that has been propounded to explain a uniquely North American hostility towards gasoline taxes. An empirical analysis is undertaken, using a survey instrument to examine public attitudes towards gasoline taxes as a means of reducing emissions from motor vehicles. The concept of "revenue recycling" gasoline tax proceeds is tested for public acceptance, as well as other hypotheses pertaining to cognitive barriers to understanding gasoline taxes. As well, economic and demographic factors are examined to study the implications of the one political economic theory of why gasoline taxes are so virulently opposed in North America.
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