A Chicago School, “free-market” economist hails the proposed gas tax:
Research by students at the University of Chicago Graduate School of Business shows that federal taxes on gasoline would have to increase by a bit less than 50 cents per gallon to cut gasoline consumption by the same percentage claimed to be achieved under the CAFE program. This assumes that each 20% increase in gas prices reduces long-run gasoline demand by 10%. Although a 50 cents increase is a lot compared with the present average total tax of 40 cents, it would raise retail gas prices to only a little more than $2 per gallon, far below prices in Europe and Japan. Increasing federal taxes to 80 cents per gallon and eliminating the CAFE program would cut gasoline use by an additional 10%, yet U.S. retail gas prices would still be much below those in other developed nations.
