Tax Pass-Through in Gasoline and Diesel Fuel : The 2003 Washington State Nickel Funding Package Increase

This paper considers a previously unexamined increase in excise taxes on gasoline and diesel fuel that were part of Washington State's Nickel Funding Package of 2003. We fail to reject full pass-through of the amount of the tax increase to retail prices in both products. We find no significant sensitivity of retail pass-through to station locations relative to state borders, or to retail competitive conditions as measured by local station density. The expansion of hypermarkets in Washington State during the period was a confounding factor that limited precision in estimating tax pass-through effects