Wednesday, March 11, 2009

Voluntary Gas Tax and "independence bonds"

Barry Nalebuff and Ian Ayres have an interesting proposal for a tax on gasoline consumption that would give automobile users the option to purchase an "independence bond", which would involve an upfront cash payment (to the user) in return for a commitment (by them) to pay the government in the future an extra tax for every gallon of gas that they used. They write,

"The government would offer a $500 advance tax rebate each year for every car you choose to sign up for the tax. In return, you would commit to pay an extra $1 for each gallon of gas you buy. The actual tax paid would be based on miles driven and fuel economy. Thus a Chevy Impala rated at 19 m.p.g. would be charged $5.26 each 100 miles, while a Prius rated at 46 m.p.g. would be charged $2.17 per 100 miles... People who already drive their cars less or who drive fuel-efficient cars would be particularly likely to opt for the independence bonds... if marketed properly, independence bonds might be appealing to a large swath of Americans. Cars that were committed to conservation would also be eligible to display decals showing their patriotism in the fight for energy independence. The decals might also authorize use of highway lanes now reserved for buses and car-poolers... People who claimed the rebate would need to have their odometers checked once a year to calculate the amount of tax owed."

This proposal is based on the premise that instead of giving taxpayers back the money after the fact, it makes a lot more sense from a behavioral perspective for the government to give them the money before the fact of the tax.

(HT: Freakonomics)

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