Sunday, June 29, 2008

Gas taxes

When gas was $2 a gallon, someone suggested a $1.00 tax at 10 cents per year phased in over 10 years. Didn't think that would really have an effect on behavior. In fact, in today's WaPo:

When gas hit $2, and even when it reached $3, car dealers saw little change in their monthly tallies. People grumbled, but they still bought cars and let their fantasies govern their decisions. If they wanted something that would dominate the road, they dug a little deeper and took out a loan.

When you want people to respond to incentives, the incentives have to be binding.

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