Transportation Taxes and Energy Transitions: Alternative Policy Designs for
14 April 2023
1.1.1 Welfare effects Like most analyses of the external costs of driving and associated welfare effects, our analysis uses a partial equilibrium approach, examining only the effects on parties in the vehicle market, assuming other parts of the economic system remain unchanged (in contrast to a general equilibrium modeling approach that accounts for the effects of a policy on all parts of the econ. [...] The VMT taxes in the B and C scenarios begin in 2025, and the tax rates in the B scenarios are calibrated to raise sufficient revenue from 2025 to 2035 to maintain highway performance. [...] Revenues in the C scenario are roughly four times higher than those in the B scenarios in 2026 (the first year the full VMT tax takes effect), but then they fall to roughly three times the revenues in the B scenarios by 2035, as fewer ICE vehicles pay the pollution portion of the VMT tax (all drivers pay the accident and congestion portions). [...] Under the C scenario, the composition of the vehicle fleet and VMT shift heavily to EVs, but the total amount of VMT across the fleet differs little from that in the A or B scenarios (Figure 6). [...] It could, in theory, be adjusted to account for the weight of the vehicle and the location and time of driving, better reflecting the external costs associated with air pollution, congestion, and accidents.