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One of the political obstacles to a gas tax is that it will disproportionately harm residents of rural and suburban areas relative to cities. City residents who take public transport won’t be directly affected by gas taxes. Furthermore, in the city public transportation is a possible substitute for driving, so that even city residents who drive now will often have the choice of an alternative mode when gas prices go up. In contrast the only way rural and suburban residents can usually mitigate the effects of higher gas prices is to change their behavior in usually costly ways, like finding a new job, moving, or purchasing a higher mpg vehicle.
As a result of this disparate impact on transportation costs for city versus rural and suburban residents, one possible long run result is that people will respond to higher gas prices by moving to the city from rural areas and suburbs. This raises the question of how this will affect housing markets in these areas. A new paper sheds some light on that issue:
By raising commuting costs, an increase in gasoline prices should reduce the demand for housing in areas far from employment centers relative to locations closer to jobs. Using annual panel data on a large number of ZIP codes and municipalities from 1981 to 2008, we find that a 10 percent increase in gas prices leads to a 10 percent decrease in construction in locations with a long average commute relative to other locations, but to no significant change in house prices. Thus, the supply response may prevent the change in housing demand from capitalizing in house prices.
…However, we find suggestive evidence that house prices do respond to gas prices in locations where the supply of housing is constrained.
A new paper from Resources for the Future summarizes the literature:
…gasoline taxes are a far more cost-effective policy than CAFE standards because they exploit more margins of behavior for reducing gasoline use. Austin and Dinan (2005) and Jacobsen (2010a) estimate that CAFE standards are about 2–3 times more costly than a gasoline tax for a given long-run reduction in fuel consumption. In Jacobsen’s (2010a) study, total welfare costs average about $2 per gallon of fuel saved for a 1 mpg increase in the CAFE standard, while a gasoline tax that saves the same amount of fuel imposes welfare costs of about $0.80 per gallon. The cost disadvantage of fuel economy standards is even more pronounced in the short run, as fuel taxes give all motorists an immediate incentive to save fuel by driving less, while new vehicle standards only permeate the vehicle fleet gradually.
Yet despite their much higher cost, CAFE standards are more popular than gas taxes. Our desire to have costs hidden from us is a very expensive preference. The Obama administration was able to pass aggressive CAFE increases in 2009, in contrast both democrats and republicans were campaigning on a gas tax cut in the 2008 election. Would either party be receptive to abolishing CAFE standards in exchange for a higher gas tax? I doubt it, but it would be good for the environment and the economy.