UC Davis Institute of Transportation Studies

The authors of this report provide estimates of the tax expenditures related to the production and consumption of transportation fuels. They begin by discussing the relationship between tax expenditures and social welfare and tax expenditures versus public-sector costs. They estimate that sales tax and corporate income tax expenditures related to motor vehicles and their fuel may be several billion dollars per year. But they emphasize that these estimates should be considered with respect to questions of fairness, not economic efficiency. The authors point out that they do not add the estimates of environmental externalities, public-sector expenditures, and tax expenditures together because tax expenditures are not necessarily social costs in the same way that environmental externalities and public sector expenditures for roads are.