The Option of an Oil Tax to Fund Transportation and Infrastructure

The Option of an Oil Tax to Fund Transportation and Infrastructure

Keith Crane
Nicholas Burger
Martin Wachs
Copyright Date: 2011
Published by: RAND Corporation
Pages: 48
https://www.jstor.org/stable/10.7249/op320rc
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  • Book Info
    The Option of an Oil Tax to Fund Transportation and Infrastructure
    Book Description:

    Federal spending on surface-transportation infrastructure outpaces federal taxes on gasoline and diesel fuel. Increasing fuel efficiency means that fuel-purchase expenditures have dropped, so real revenue generated from these taxes has declined. A percentage tax on crude oil and imported refined-petroleum products consumed in the United States could fund U.S. transportation infrastructure.

    eISBN: 978-0-8330-5183-7
    Subjects: Transportation Studies, Business

Table of Contents

  1. Front Matter
    (pp. i-ii)
  2. Preface
    (pp. iii-iv)
  3. Table of Contents
    (pp. v-vi)
  4. Figures
    (pp. vii-viii)
  5. Tables
    (pp. ix-x)
  6. Summary
    (pp. xi-xii)
  7. Acknowledgments
    (pp. xiii-xiv)
  8. Abbreviations
    (pp. xv-xvi)
  9. SECTION 1 Introduction
    (pp. 1-2)

    Highway expenditures in the United States are increasing while revenues from traditional funding sources, taxes on gasoline and diesel, are declining (Figure 1). As Americans continue to drive, but motor vehicles become more fuel efficient, this funding gap will continue to widen, presenting Congress with the challenge of how to reliably fund transportation infrastructure.

    Each year, U.S. citizens incur a number of real, if unseen, costs associated with the consumption of gasoline and diesel and, by extension, oil. These range from environmental pollution stemming from the consumption of gasoline and diesel fuel to macroeconomic instability from oil price shocks to...

  10. SECTION 2 Why Tax Oil?
    (pp. 3-6)

    The U.S. federal government and the states finance most expenditures on roads and some on public transportation by taxing gasoline and diesel fuel. Revenues from federal taxes flow into the federal HTF, which includes a transit account. Federal transportation appropriations are paid to the states through disbursements from the trust fund.

    Federal taxes on gasoline and diesel are $0.184 and $0.244 per gallon, respectively. They have not been raised since 1993 (Energy Information Administration, 2010a). Since the federal gasoline tax was last increased, the purchasing power of the dollar as measured by the consumer price index has fallen by one-third....

  11. SECTION 3 How Much Might Oil Be Taxed?
    (pp. 7-16)

    A key challenge to implementing a percentage tax on petroleum is setting appropriate tax rates. In any one period, the rate needs to be set so that it generates sufficient revenues to fund appropriate levels of federal spending on transportation. We argue that rates should also be set so that they address the external costs associated with oil consumption. In this section, we discuss the tax rates needed to generate revenues sufficient to fund current proposals for spending on ground transportation and describe the various external costs the tax might also be used to cover.

    In 2009, federal spending on...

  12. SECTION 4 Who Would Pay the Tax?
    (pp. 17-24)

    The most cost-effective place to collect a per-barrel tax on domestically refined oil would be at the refinery. For imports of refined oil products, the collection point would be at the port of entry. Both refiners and terminal operators would attempt to pass the cost of the tax along by raising prices for products produced from the oil, the most important of which are gasoline, diesel fuel, home heating oil, jet fuel, residual fuel oil (bunker fuel), and liquefied petroleum gases (see Figure 3). An oil tax would raise the price consumers pay for petroleum-based products. At the same time,...

  13. APPENDIX Gasoline Prices and Federal Tax History, 1949–2008
    (pp. 25-28)
  14. Bibliography
    (pp. 29-32)