Of floor prices and taxes

As a couple of sharp-eyed commenters pointed out, I wasn’t clear in my previous post on a gasoline floor price.


The idea would be to set a tax equal to the difference between the market price and the floor price whenever the market equilibrium price is below the floor.  If the market price is above the floor, then there would be no extra tax (beyond the current per-gallon gas tax).  That way the government would reap a windfall when the market price declines.


And what should be done with this windfall?  It should be either given back to taxpayers on a per-family basis, so that it is revenue neutral, or the windfall could be invested in transit, active transportation infrastructure, or incentives for electric or fuel-cell vehicles.



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