Federal excise taxes on gasoline vary widely across

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Federal excise taxes on gasoline vary widely across the developed world. The United States has the lowest taxes at USD $0.40 per gallon (or £0.07 per liter); Canada has taxes of $0.60 per gallon, Japan and much of Europe is $2.00 per gallon, while Britain has the highest tax at $2.3 a gallon or £0.5 per liter. If gasoline taxes are intended to reduce the time losses from road congestion in urban environments and gasoline pre-tax costs about £0.40 per liter, why might the optimal tax in Canada be 50% higher than the United States? What would be an explanation for why adjacent countries would have such different estimates of the price elasticity of demand for auto driving? Please show how or why this answer was concluded.

Reference no: EM131002083

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Federal excise taxes on gasoline vary widely across : Federal excise taxes on gasoline vary widely across the developed world. The United States has the lowest taxes at USD $0.40 per gallon (or £0.07 per liter); Canada has taxes of $0.60 per gallon, Japan and much of Europe is $2.00 per gallon, while Br..

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