UNH Professor: Increasing
Gas Taxes Would Have Positive Economic And Environmental Effects
Contact: Lori Wright
UNH Media Relations
Jan. 11, 2006
DURHAM, N.H. – Americans may be feeling the pain of rising
prices at the gas pump, but one University of New Hampshire professor
advocates increasing gas taxes in regions such as New England, which
he says could have positive effects on regional economies and environments.
Richard England, professor of economics and natural resources at
the UNH Whittemore School of Business and Economics, details his
latest research, “Motor Fuel Taxation And Economic Development:
A Regional Approach,” in the Dec. 26, 2005, issue of State
Tax Notes. According to England, increasing gas taxes could raise
per capita income and boost employment in conjunction with improving
air quality and other environmental factors.
Americans are the most mobile people in history. In 2003, they logged
2.89 trillion miles in their vehicles, the equivalent of more than
6 million round trips between Earth and the moon. Along the way,
those vehicles burned 169.6 billion gallons of gasoline and diesel
In addition to the private costs of operating vehicles, such as
gas, insurance and repairs, social costs such as highway fatalities
and injuries, noise pollution, and urban road congestion are incurred.
In 2000 more than 40,000 people died in traffic accidents and 3.1
million people were injured. Road congestion led to 3.7 billion
hours of travel delay in 85 metropolitan areas during 2003, and
the U.S. Environmental Protection Agency has logged nearly 449,000
leaks from underground tanks, many of them at gas stations.
“The difference between the private and social costs of motor
vehicle transport points to a major misallocation of resources within
the U.S. economy. The best public policy would be to reform and
increase the excise tax on retail purchases of motor fuels,”
“Metropolitan areas with lower air pollution levels tended
to attract a net flow of migrants from 1990 to 2000. Hence, if a
region were to improve its relative environmental quality by restraining
its motor fuel consumption, it could expect a positive effect on
labor supply growth, especially for more educated labor,”
In addition, reducing automotive emissions could help prevent tighter
federal regulations on factories, power plants, and other stationary
emitters of ozone precursors – regulations that could threaten
a region’s future industrial competitiveness in national and
For oil-importing areas such as New England, higher gas taxes could
have another competitive benefit for the regional economy –
creating a sort of buyers’ coalition. “If several New
England states were to raise their fuel taxes simultaneously, they
could function as a buying cartel and thereby lower the import price
of refined oil products shipped into the region. Lowering both the
import price and the quantity consumed of motor fuels would improve
the region’s trade balance with the rest of the world and
also reduce its vulnerability to the growing volatility of gasoline
prices in the U.S. market,” England says.
The New England region is ideal for higher gas taxes for a number
- Refined oil products are imported into the region so most revenue
from retail fuel purchases presently flows to other states or
- A gas tax increase would likely induce a relatively large amount
of energy conservation, even in the short run, because southern
New England is a highly urban region and offers commuters relatively
good public transit service, suggesting the price elasticity of
demand for gasoline is higher in parts of New England than the
- Most New England states have relatively high per capita incomes.
Despite their relative affluence, these states have been experiencing
slow population growth, with the exception of New Hampshire. Because
county-level rates of employment growth are positively associated
with environmental quality, reducing the environmental costs of
motor vehicle transportation could help New England to attract
and retain skilled employees who could easily locate in other
- The region’s governors declared in 2001 that they want
to reduce greenhouse gas emissions and implement actions that
result in higher efficiency in the transportation of passengers
England proposes the gas tax increase be combined with a rebate
to the state’s registered vehicle owners, a provision that
would eliminate any regressive features of his gas tax proposal.
“As a higher gas tax rate is introduced in a state, the incremental
revenues from that tax increase could be rebated in equal shares
to its registered vehicle owners. This idea is hardly new: In a
1975 speech on energy policy, President Gerald Ford advanced a similar
plan. A 2004 study found that a $1 increase in the federal gas tax
combined with a lump sum transfer of the extra revenues to households
would have a decidedly progressive incidence,” he says.
Editors: Richard England can be reached at 603-862-3335 or Richard.England@unh.edu.
His full report is available at http://www.unh.edu/news/docs/england_motorfueltax.pdf.