Publications by Author: Muehlegger, Erich

The canonical theory of taxation holds that the incidence of a tax is independent of the side of the market which is responsible for remitting the tax to the government. However, this prediction does not survive in certain circumstances, for example when the ability to evade taxes differs across economic agents. In this paper, we estimate in the context of state diesel fuel taxes how the incidence of a quantity tax depends on the point of tax collection, where the level of the supply chain responsible for remitting the tax varies across states and over time. Our results indicate that moving the point of tax collection from the retail station to higher in the supply chain substantially raises the pass-through of diesel taxes to the retail price. Furthermore, tax revenues respond positively to collecting taxes from the distributor or prime supplier rather than from the retailer, suggesting that evasion is the likely explanation for the incidence result.

Climate change is a complex long-run phenomenon. The speed and severity with which it is occurring is difficult to observe, complicating the formation of beliefs for individuals. We use Google Insights search intensity data as a proxy for the salience of climate change and examine how search patterns vary with unusual local weather. We find that searches for "climate change" and "global warming" increase with extreme temperatures and unusual lack of snow. The responsiveness to weather shocks is greater in states that are more reliant on climate-sensitive industries and that elect more environmentally-favorable congressional delegations. Furthermore, we demonstrate that effects of abnormal weather extend beyond search behavior to observable action on environmental issues. We examine the voting records of members of the U.S. Congress from 2004 to 2011 and find that members are more likely to take a pro-environment stance on votes when their home-state experiences unusual weather.

Gasoline taxes can be employed to correct externalities associated with automobile use, to reduce dependency on foreign oil, and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to gasoline price changes. In this paper, we directly examine how gasoline taxes affect consumer behavior as distinct from tax-exclusive gasoline prices. Our analysis shows that a 5-cent tax increase reduces gasoline consumption by 1.3 percent in the short-run, much larger than that from a 5-cent increase in the tax-exclusive gasoline price. This difference suggests that traditional analysis could significantly underestimate policy impacts of tax changes. We further investigate the differential effect from gasoline taxes and tax-exclusive gasoline prices on both the intensive and extensive margins of gasoline consumption. We discuss implications of our findings for the estimation of the implicit discount rate for vehicle purchases and for the fiscal benefits of raising taxes.