The Politics and Psychology of Gasoline Taxes: An Empirical Study

Economists are beginning to form a consensus that a carbon tax is the most effective and cost-effective way to reduce global greenhouse gas emissions. The insight of economists and other policy analysts is that, in the greenhouse gas context, the design of cap-and-trade programs creates so many opportunities for rent-seeking that they may not be very cost-effective, and may not reduce greenhouse gas emissions at all. Carbon tax proposals are appealing because they are so simple and sensible that rent-seeking would have to be very audacious to succeed. Carbon tax proposals, however, have divided economists from almost everybody else. In particular, the gasoline tax is an exceptionally effective and efficient carbon tax that has been even more unanimously supported by economists-and even more virulently opposed by almost everyone else. This Article explores some of the psychological barriers to public acceptance of gasoline tax increases and examines a political economic theory that has been propounded to explain a uniquely North American hostility towards gasoline taxes. An empirical analysis is undertaken, using a survey instrument to examine public attitudes towards gasoline taxes as a means of reducing emissions from motor vehicles. The concept of revenue recycling gasoline tax proceeds is tested for public acceptance, as well as other hypotheses pertaining to cognitive barriers to understanding gasoline taxes. Also, in understanding why gasoline taxes are so virulently opposed in North America, economic and demographic factors are examined to study the implications of this political economic theory