ANALYSIS OF FUEL ECONOMY EXCISE TAXES AND REBATES

Excise taxes on fuel-inefficient automobiles and rebates for fuel-efficient automobiles have been proposed to reduce gasoline consumption by encouraging a more fuel-efficient automobile fleet. This paper presents a methodology for estimating the impact that varous automobile excise tax and rebate proposals will have on fuel consumption, fuel economy of the new automobile fleet, and total automobile sales. This analysis explicity considers the cost to improve the technical efficiency of automobiles and the potential for shifting consumers to smaller automobiles. The results of the analysis are displayed graphically for a prototypical excise tax proposal.