Evaluating Fuel Tax Equity: Direct and Indirect Distributional Effects

tration calls for a general tax on all energy products. Along with raising revenue, such a tax has the desirable effects of conserv-ing finite resources, reducing pollution emissions, and reducing dependency on foreign supplies of energy. In addition, the tax is consumption based. However, energy taxes can have important distributional im-pacts, depending on which fuels are taxed and how taxes are imposed. This study ex-amines these impacts in a general equilib-rium framework.’ Most studies of the distributional effects of energy price increases are partial equilib-rium in nature. Attention focuses on a par-ticular fuel or fuel aggregate, and effects on other commodities are ignored. Exam-ples are seen in the work of Zupnick (1975), Palmer et al. (1976), Stucker (1977), Henderson (1988), and Poterba (1991), who find that gasoline and other energy taxes place disproportionate bur-dens on low income and nonwhite con-sumers.’ Partial equilibrium studies are incapable of capturing the entire range of relationship