Truck and Barter: A Gasoline Tax Rebate

Economists agree -- with experience and theory behind them -- that reducing gasoline taxes will not lower prices in the short run. But will offering a gasoline tax rebate -- refunding all federal taxes paid for gasoline -- increase them? If so (noting that a very small percentage of people complete rebates) by how much?

I envision a national rebate center much like any crooked electronics rebate scheme, only government run. You purchase your gas, and save your receipts. Every quarter, you send in your receipts, with a total tallied on a form, and get a rebate check 6-8 weeks later. You can cash the check for free at Wal-Mart or other fine retailers.

Alternatively, the taxes can be returned to consumers on a uniform basis of car ownership as of a specific date, which eliminates the paperwork (since all the Feds have to do is consult the DMV databases of each state and territory), but this option ignores differences in gasoline consumption. To do that you could adjust for EPA fuel economy, giving gas guzzler owners a greater rebate than fuel efficient small car, diesel, and hybrid owners :-) .

This may not sound appealing, but in the calculations of Lawrence Shephard, a uniform rebate converts an overall regressive tax into a highly progressive tax/rebate schedule.

But if enacted in reality, what could possibly go wrong?

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Note that I'm not advocating this policy; I'm just curious about it. In May, Nevada Democrats decided a gasoline tax rebate -- not a lowering of tax rates -- was an excellent way to return a surplus to the people. That never happened, perhaps because it became a ridiculously complicated car registration rebate scheme (which only uses the DMV database to select recpients, but does not refund them DMV fees!?), in order to avoid federal taxation.

Income($1971) W/O Rebate W/ Rebate -$3000 -1.39% 4.66% 3000-3999 -1.21% 1.82% 4000-4999 -1.42% 0.93% 5000-5999 -1.60% 0.34% 6000-7499 -1.48% 0.10% 7500-9999 -1.40% -0.17% 10,000-14,999 -1.15% -0.28% 15,000+ -0.91% -0.49%

Comments

M1EK wrote:

The gas tax is not (overall) regressive; only from the middle to upper class. http://mdahmus.thebaba.com/blog/archives/000188.html

-- September 8, 2005 12:31 PM ∞

Kevin Brancato wrote:
Thanks for your comment, and I concede your point.

I agree that it's not regressive from low to mid incomes; from the data in the study I cited, it's flat (or wiggly) in that range.

That's why I wrote it was regressive overall (by which I meant the slope over all incomes). Indeed, I'm not wedded to this belief either, and will gladly recognize better models.

But Shephard's paper indicates that although the percent of income taken from low and middle income earners is about the same, the gas tax takes a smaller percentage from high income earners than low or mid income earners. But's even from low/mid to high, it's still pretty flat.

Additionally, adding in the rebate sheme makes the overall numbers look highly progressive and redistributionist.

Here's the data from Shepard's 1976 paper:
Income($1971)    W/O Rebate   W/ Rebate
-$3000          -1.39%        4.66%
3000-3999       -1.21%        1.82%
4000-4999       -1.42%        0.93%
5000-5999       -1.60%        0.34%
6000-7499       -1.48%        0.10%
7500-9999       -1.40%       -0.17%
10,000-14,999   -1.15%       -0.28%
15,000+         -0.91%       -0.49%
-- September 8, 2005 1:57 PM ∞

M1EK wrote:

Good table. I'd much rather see the money dumped back into urban transit (additional operating subsidies), since the practice of reserving gasoline taxes for roadway spending, even if your state is one of the few that DOESN'T wildly supplement it with property and sales taxes, still penalizes urban residents, since in most cities there's little that can be done to make driving better OTHER than improving mass transit so the money ends up getting dumped into suburban roads instead.

Plus, this tends to have the same progressive impact as the rebate would, since the poor would disproportionately benefit from that transit investment.

-- September 9, 2005 10:18 AM ∞

geoffberg wrote:

I think both your models for a rebate structure minimize the opportunities to be derived from a tax rebate system. The first depends on the inefficiency of the system to generate income I suppose and the second only rebates money to car owners and the biggest users of fuel the most.

I argue in my blog www.theenergyanswer.blogspot.com that fossil fuels should be taxed starting with gasoline and the money rebated to all consumers at a flat rate no matter how much energy they use. That rewards those with the most efficient cars and those with no cars at all. The later are still paying the tax through the higher cost of goods and services which will be passed along by the vendor through to the consumer. Virtually everyone has a financial relation with the government and the rebate could be passed along through reduced payroll taxes and increases in social security and welfare payments.

Such a tax rebate system is progressive while providing the maximum incentive to save energy.

Geoffberg

-- July 22, 2006 12:14 PM ∞

wow power leveling wrote:

thanks

-- May 20, 2009 9:29 PM ∞

气动搅拌机 wrote:

good

-- June 11, 2009 9:22 PM ∞

Truck and Barter

A Gasoline Tax Rebate

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