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The optimal gas tax for California

C.-Y. Cynthia Lin Lawell () and Lea Prince

Energy Policy, 2009, vol. 37, issue 12, 5173-5183

Abstract: This paper calculates the optimal gasoline tax for the state of California. According to our analysis, the optimal gasoline tax in California is $1.37/gal, which is over three times the current California tax when excluding sales taxes. The Pigovian tax is the largest part of this tax, comprising $0.85/gal. Of this, the congestion externality is taxed the most heavily, at $0.27, followed by oil security, accident externalities, local air pollution, and finally global climate change. The other major component, a Ramsey tax, comprises a full $0.52 of this tax, reflecting the efficiency in raising revenues from a tax on gasoline consumption due to the inelastic demand of this consumption good.

Keywords: Gasoline; tax; California; Gasoline; demand; elasticity (search for similar items in EconPapers)
Date: 2009
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