Energy Taxes: Traditional Efficiency Effects and Environmental Implications

This paper examines "traditional" (non-environmental) efficiency consequences and environmental effects of two energy tax policies: a tax on fossil and synthetic fuels based on Btu (or energy) content and a tax on consumer purchases of gasoline.It uses a model that uniquely combines attention to details of the U.S. tax system with a consolidated treatment of U.S. energy use and pollution emissions.On traditional efficiency grounds, each of the energy taxes emerges as more costly to the economy than increases in personal or corporate income taxes of equal revenue yield.The time profiles of GNP and consumption are significantly lower under the energy taxes than under the alternatives.