Examining the Economic Impacts of the Increased Fuel Efficiency Standards on State Gas-Tax Revenues

Abstract

The US Department of Transportation announced an increase in the Corporate Average Fuel Economy standards for cars and light trucks on January 27, 2009, which affect vehicles in production until the year of 2025. The new standards will make the cars and light trucks more fuel efficient than before and lead to reduced gas-tax revenues at federal and state levels. Although some studies have investigated the impacts of the new standards at the federal level, no study specifies the state gas tax revenue impact. To fill this void, this research estimates the shortfall of state gas-tax revenues and its consequences.