Simultaneous optimization of multiple taxes on car use and tolls considering the marginal cost of public funds in Japan

Tatsuhito Kono, Yohei Mitsuhiro and Jun Yoshida
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Yohei Mitsuhiro: Tohoku University

The Japanese Economic Review, 2021, vol. 72, issue 2, No 6, 297 pages

Abstract: Abstract We simultaneously optimize multiple tax instruments (fuel tax, car-ownership tax, and tolls) when these instruments are used as public funds with distortionary labor tax, accounting for pollution, congestion, accident externalities, and fiscal constraints of the tax-related agency and the toll-collecting agency. We quantitatively optimize taxes and tolls using parameters for Japan under three scenarios: (1) imposition of peak and off-peak tolls at different rates and simultaneous optimization of all tax instruments; (2) optimization of only car-related taxes without consolidation of the toll-collecting agency’s fiscal constraints; (3) optimization of only fuel tax. We find that peak toll and fuel tax should be higher, and off-peak toll and car-ownership tax should be lower than the current rate under Scenario 1. Scenarios 1 can improve welfare by 1000 to 2400 dollars/car, and Scenarios 2 and 3 can achieve more than 90% and 20–60% of the welfare gain in Scenario 1, respectively.

Keywords: Optimal taxation; Marginal cost of public funds; Toll; Fuel tax; Car-ownership tax; Externality (search for similar items in EconPapers)
JEL-codes: H21 H23 R48 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s42973-019-00029-4

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