The downside of lower gas taxes The federal gas tax is 18.4 a gallon and the sta

Question

The downside of lower gas taxes The federal gas tax is 18.4 a gallon and the state gas tax ranges from 20e to 40e a gallon. As motorists switch to more efficient cars, the federal and state government gas tax revenue will fall. To raise revenue for infrastructure repairs, some states are considering dropping the gas tax and introducing a mileage tax, perhaps 2.3 per mile Source: CNNMoney, June 9, 2009 How would a mileage tax differ from the gas tax in its effects on an owner of a gas guzzler and an owner of a fuel-efficient hybrid? Which tax would be fairer: the mileage tax or the gas tax? When the gas tax is replaced by a mileage tax, tne amount ot tax paid by the owner ot a gas guzzierand the amount of tax paid by the owner of a fuel-efficient hybrid , other things remaining the same. OA. decreases; increases O B. increases, decreases O C. decreases, decreases O D. changes by an unknown amount, changes by an unknown amount O E. increases; increases The mileage tax is a fairer tax than the gas tax if on the ability-to-pay principle, O A. wealthy people own the gas guzzlers; O B. wealthy people own the fuel-efficient hybrids; O C. poor people own the gas guzzlers; and on the benefits principle because those who drive more miles receive the greater benefit fom the road system everyone receives a benefit from the road system everyone receives the same benefit from the road system

Explanation / Answer

a) when the gas tax is replaced by a mileage tax the amount of tax paid by the owner of a gas guzzler "decrease" and the amount of tax paid by the owner of a fuel-efficient hybrid "Increases", other things remaining the same. The answer is "A".

b) "B"

When the wealthy people own the fuel-efficient hybrids and everybody receive a benefit from the road system.

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