The administration is floating–re-floating, actually–a proposal to levy a tax based on mileage driven. From an economic perspective, this is a puzzler. If the objective is to reduce CO2 emissions or pollution, it would be far preferable to do so via fuel taxes because (a) pollution is a function of fuel consumption, and (b) fuel consumption depends not just on mileage driven, but on vehicle size, age, maintenance, etc. Any system that attempts to adjust the tax rate based on vehicle type and weight, etc., would still be less effective at taxing pollution than a fuel tax. Not to mention that this would require an entirely new monitoring and enforcement mechanism that isn’t free. All this isn’t that hard to figure out. So what gives? Social control comes to mind. Any other suggestions?
Affiliation: University of Houston
Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.
Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.
He holds a Ph.D. in business economics from the University of Chicago.
Visit: Streetwise Professor