The Incidence of Automobile Pollution Control

Abstract

The incidence of a vehicle tax to reduce automobile pollution is examined over all affected groups: consumers, stockholders, pollution sufferers, and government expenditure beneficiaries. Gains and losses are estimated under alter native assumptions about industry pricing. The net effect of the tax is regressive if government expenditure benefits are distributed neutrally. Under different expenditure assumptions the tax effect becomes progressive, but the results suggest that a tax on emissions rather than vehicles may be more equitable as well as more efficient.