I’m not saying I support LaHood’s idea, Robert. I’m saying you can make a good case for it if your only other choice is a gasoline tax. But that’s arguing about which idea is a second-best idea rather than, say, a third-best idea. The first-best idea is to get the feds out of transportation.

A gasoline tax, by the way, is not a great way of internalizing environmental externalities for all the reasons argued in the paper I linked to in my original post. Regardless, if a VMT failed to change behavior much, it would still “internalize the externality” if the tax were set correctly. Proceeds from the tax could then be rebated to victims of air pollution. After all, the entire point of the Pigouvian exercise in this case is to deliver prices that would be delivered in a market if those doing the harm were forced to satisfactorily compensate those who were being harmed.