Wednesday, February 25, 2009

Oregon's Gas Tax: 90 Years Ago Today

On this very day in 1919, Oregon became the first state in the union to impose a per-gallon gas tax. [HT: Greg Mankiw]

Given the cost associated with the release of carbon into the atmosphere, it is time to consider a new gas tax that aligns the price of a gallon of gas with its true costs, both private and social. It is certainly better than a beer tax!


Jacob Grier said...

Clarification: What do you mean by "private and social"? I take it by social you mean the harm caused by CO2 and other emissions, plus perhaps side effects like sprawl and traffic, but I'm confused about the private part.

I'm also curious to know if you'd prefer a gas tax to a broader carbon tax, given how frequently you bring it up.

Patrick Emerson said...

Good question. The private costs is the cost of exploring for oil, drilling wells, transportation, refining, operating gas stations, etc. All this is included in the price of gas. But there is also the cost I impose on society as a whole from the damage to the environment (among other things - but here I am just talking about that), which is not included in the price.

I am for carbon taxes in general because they are efficient taxes in the Pigovian sense. The problem is in how to administer and how ti figure out the cost of carbon accurately - but in general I prefer them. If you are thinking about carbon v. cap-and-trade, I think theyre is a strong argument for using C&T to deal with old power plants for efficiency reasons, but a carbon tax on coal would achieve efficiency going forward (for new plants). So in this case I am of two minds.

Jacob Grier said...

Ah, thanks. I thought you meant there were private costs that weren't reflected in the price of gas, which was confusing.