Should Fuel Taxes Be Scrapped in Favor of Pay-by-the-Mile Charges?

Ian Parry

Published: September 2005

This paper discusses the appropriate balance between traditional gasoline taxes and charging by the mile, focusing on economic efficiency considerations. It begins with a brief discussion of the five major passenger vehicle issues of concern—local pollution, greenhouse warming, oil dependency, traffic congestion, and traffic accidents—and summarizes evidence on the dollar value costs of these problems for passenger vehicles in the United States. It then discusses how much fuel taxation might be justified to account for them, as well as how much taxation might be appropriate on fiscal grounds, assuming per mile charges are unavailable. Finally, it discusses to what extent fuel taxation should be replaced with per mile taxes.

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