Fixed vs marginal costs

Green Tax Shift A lot of the taxes on vehicles are fixed. They do not vary with how much you use your car. Examples include registration and license fees. While for some people they may affect the decision to purchase a car, they do not affect how much you use you car, how much damage your car does to the road or how much pollution it emits. It would be better to drop the fixed charges such as registration and fees and switch to a tax on fuel. The tax you pay then depends on the pollution and damage to the roads (ie, it is a marginal cost). It acts as a disincentive for pollution and road wear, rather than just a way to raise revenue to pay for road building and maintenance. It is also fairer because the amount you pay depends on how much you use the roads and how much you pollute.