Infographic
Are Fuel Taxes Regressive?
One of the main arguments against raising
fuel taxes is the popular belief that they
disproportionately hurt poor people. In this
context, fuel taxes are considered “regressive” because the burden of the tax as a
share of income falls heavier on the poor.
But RFF University Fellow Thomas Sterner
and colleagues find that in years falling
between 2002 and 2007, this conventional
wisdom held mainly for the United States.
Using a measure of regressivity known as
the Suits Index—where -1 indicates a tax
that the poorest person fully pays and +1
a tax the richest pays—they show that for
many developing countries a fuel tax is
strongly progressive, while for other developed countries it is neutral or only modestly
regressive. In countries where the very
poorest households cannot afford to own a
car at all, fuels have more of a “luxury” character, and hence fuel taxes are progressive.
$50K
USA
PER-CAPITA GDP, PPP (2007, CURRENT INTERNATIONAL $)
$40K
SWEDEN
GREAT BRITAIN
GERMANY
FRANCE
ITALY
$30K
CZECH REPUBLIC
$20K
MEXICO
CHILE
COSTA RICA
SOUTH AFRICA
IRAN
$10K
CHINA
INDIA
GHANA
$1K
.5
.3
.4
.2
.1
-.1
-.2
-.3
-.4
-.5
0
SUITS COEFFICIENT
Source: World Bank Indicators and Thomas Sterner, ed.,
Fuel Taxes and the Poor: The Distributional Effects of
Gasoline Taxes and Their Implications for Climate Policy
(RFF Press, 2011), http://www.routledge.com/books/
details/9781617260926/.
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