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Fuel Tax Incidence and Supply Conditions

Justin Marion () and Erich Muehlegger

No 16863, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The incidence of taxes on consumers and producers plays a central role in evaluating energy tax policy, yet the literature testing the main predictions of the tax incidence model is sparse. In this paper, we examine the pass-through rate of state gasoline and diesel taxes to retail prices, and importantly we estimate the dependence of pass-through on factors constraining the gasoline and diesel supply chains. We consider several factors that alter the elasticity of supply, including within state heterogeneity in gasoline content requirements, refinery capacity utilization, inventory constraints, and variation in the demand for untaxed uses of diesel. In general, we find that in periods of time when the supply chain is constrained, and the constraint is plausibly unrelated to shifts in demand, the pass-through rate of fuel taxes declines. We describe several potential implications for tax policy, including tax breaks during peak driving season and during times of supply disruptions such as after major hurricanes.

JEL-codes: H22 H71 L98 Q4 (search for similar items in EconPapers)
Date: 2011-03
Note: EEE PE
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Published as Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9), pages 1202-1212.
Published as Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1202-1212, October.

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Journal Article: Fuel tax incidence and supply conditions (2011) Downloads
Journal Article: Fuel tax incidence and supply conditions (2011) Downloads
Working Paper: Fuel Tax Incidence and Supply Conditions (2010) Downloads
Working Paper: Fuel Tax Incidence and Supply Conditions (2010) Downloads
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