Doctoral Dissertations

Date of Award

8-2004

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Economics

Major Professor

Michael J. McKee

Committee Members

Donald J. Bruce, Terry L. Miller, Matthew N. Murray

Abstract

The objective of this dissertation is to determine whether motor vehicle wealth taxes have unintended consequences for fleet turnover, emissions and air quality. Twenty-eight U.S. states have an annual motor vehicle wealth tax that is based on either the age or value of the vehicle, which results in tax liabilities that decrease with age. Given this structure, households have an incentive to make adjustments to their vehicle stocks in favor of older vehicles. These adjustments may be harmful to the environment as older vehicles have higher emissions.

To achieve this objective I have divided this dissertation into three separate empirical analyses. In the first analysis, I use data from the 2001 National Household Travel Survey to identify the effects of motor vehicle wealth taxes on households’ vehicle purchase and age decisions. I estimate a binary choice model to examine the effects of various measures of the motor vehicle wealth tax on households’ decisions to purchase a vehicle in a given year while controlling for household demographics, the availability of public transportation and transaction taxes. I then estimate an ordinary least squares regression model to examine the effects of wealth taxes on the vehicle age decision for those households that purchased at least one vehicle in 2001. The results indicate that motor vehicle wealth taxes have a statistically significant negative but rather modest effect on the probability that a household purchases a vehicle in a given year. However, once a household has decided to make a purchase, the presence of a wealth tax does not affect its vehicle age decision.

In the second analysis, I use state vehicle registration data from R.L. Polk and Company to estimate vehicle age distributions in individual states. To isolate the effects of motor vehicle wealth taxes on the proportion of vehicles in each of twenty-five age categories, I estimate a multinomial logit model. I then conduct simulations using the results from this model to construct vehicle age distributions under each state’s current wealth tax regime and the age distributions that would result given a change in the wealth tax regime. A comparison of these distributions identifies the magnitude of the effects of wealth taxes on fleet age by state. The results suggest that motor vehicle wealth taxes do indeed have a statistically significant effect on vehicle age distributions; however, the magnitude of the effect is quite modest. Specifically, motor vehicle wealth taxes slightly increase the fraction of vehicles between the ages of ten and sixteen and decrease the fraction of vehicles in the oldest age categories, all else constant.

In the final analysis, I employ the MOBILE6 emissions model created by the Environmental Protection Agency to explore the effects of motor vehicle wealth taxes on emissions and air quality. I use vehicle age distributions associated with different motor vehicle wealth tax regimes in the emissions model to generate emission factors for three major mobile source pollutants. The emission factors associated with these different scenarios suggest that the slight differences that exist between vehicle age distributions by wealth tax status have virtually no effect on emissions.

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