The Consumer Burden of a Carbon Tax on Gasoline

Abstract

This paper measures the incidence of a carbon tax on gasoline using current income and two measures of lifetime income to rank households. Our results suggest that carbon taxes on gasoline are more regressive when annual income is used as a measure of economic welfare than when lifetime income measures are used. In addition we find that the regional variation in the gasoline tax burden is likely to be modest varying by less than one-half of a percentage point with little fluctuation over the years of our analysis. These results carry through when we consider the incidence of the current state gasoline taxes, both across income deciles as well as across regions.