The potential benefits and costs of an increase in US gasoline tax

Abstract

This paper examines the impact that an increase in the tax on gasoline would have on the US economy. That is, in the context of a general equilibrium model, the effect that a 15¢/gallon increase in the tax on gasoline would have on producing sectors, consuming sectors, households and the government is estimated. The results suggest that there will be a reduction in output by all producing sectors by about $9.4 billion, there will be a fall in the consumption of goods and services by about $9.6 billion and there will be a decline in aggregate social welfare (measured as utility) by about $15.0 billion. The government will realize an increase in revenue of about $8.0 billion.