USA Today Editorial—Gas Tax holds the key to ending nation’s addiction to oil

Posted by Kendall Harmon

Four decades of experience suggests the only way to wean the nation off its ruinous oil addiction is prices that go up and stay up. And, although it's a political non-starter for now, the simplest and best way to achieve that is to gradually raise the federal gasoline tax, now 18.4 cents a gallon, where it has been since 1993.

The arguments for a gas-tax increase are no less compelling for their familiarity. Higher taxes would produce substantial revenues — roughly $1 billion a year for every extra penny in tax — that could be used to fix roads and reduce the budget deficit. They would make fuel-efficient cars more attractive.

Ultimately, higher taxes could help drive alternative technologies that would slow the flow of money to finance some of the world's worst regimes and multinational oil companies, such as BP.

Whether increasing the gas tax would reduce the need for drilling in environmentally sensitive areas such as the Gulf depends on worldwide demand for oil, which is being driven upward by the rising economies of China and India. But those countries have their own efforts to curb gasoline use, and reducing consumption in the USA, the world's top oil consumer, is essential.

Read it all.

Filed under: * Economics, PoliticsEconomyTaxesEnergy, Natural ResourcesPolitics in GeneralHouse of RepresentativesOffice of the PresidentSenate

19 Comments
Posted July 27, 2010 at 9:00 am [Printer Friendly] [Print w/ comments]



1. Capt. Father Warren wrote:

The money quote:  “Higher taxes would produce substantial revenues — roughly $1 billion a year for every extra penny in tax — that could be used to fix roads and reduce the budget deficit.”
I suppose they could be used for those things: we all know however, they won’t.

July 27, 9:06 am | [comment link]
2. DonGander wrote:

Why is the solution to every alleged problem more taxes and government control?

No, don’t answer the rhetorical question. But I do wonder at how we so readily allow it.

Don

July 27, 9:36 am | [comment link]
3. Bart Hall (Kansas, USA) wrote:

Profits on each gallon of gasoline sold:

a) Rapacious, evil, nasty, greedy Big Oil—7 to 11 cents in really good times, and a loss in bad ones.

b) Altruistic, beneficial, selfless, efficient Big Government—25 to 40 cents, good times or bad, depending on the state.

c) Credit Card companies—2 to 4 cents per gallon, and the higher the price goes, including taxes, the more money they make.

d) Filling Station owners—2 cents in good times, and a big loss when prices are high (credit card fees eat all their gross revenue). Filling stations make their money on snacks are (much more rarely these days) their garage services.

Therefore, the only possible beneficiaries of tax-driven higher gasoline prices are, ta-da, Big Government and the banks running credit card companies.

Why am I unsurprised?

Note to the clueless idiots in government and media: gasoline will always be a by-product of refining crude oil, and it must, therefore, be consumed. You cannot make gasoline go away, and it does not store particularly well. Looming surpluses will drive down the price of the raw (un-taxed) product and wipe out profits in spite of taxes, but the government-as-savior crowd will not care.

They’ll pocket the taxes, spend like the wastrels they are, and then go looking for something else to tax.

July 27, 9:40 am | [comment link]
4. Jon Edwards wrote:

doesn’t a gas tax start weaning us off other things too… like the food transported in gas powered trucks, and harvested using gas-powered machinery? Or shelter? Like the rent on those buildings built with trucked materials and built with machines?

It also means taxes eat up disposable income which will keep people from spending so that they can afford the now more expensive necessities of life.

Standard first stage thinking. Only imagining the results directly attributable to the policy, not how it will work itself through the whole economic system.

July 27, 10:07 am | [comment link]
5. Umbridge wrote:

I guess my addiction to oil comes from a 100 minute round trip commute every day. Maybe it’s my wife’s 30-minute round trip commute to work? It could be my daughter’s 40-minute round trip to college? So…if there is a tax, will that make me drive less? What a bunch of imbeciles.

July 27, 10:11 am | [comment link]
6. Bart Hall (Kansas, USA) wrote:

Jon—trucks, trains, and farm machinery have been powered by diesel, not gasoline, for over 50 years. It is the refining of diesel that produces gasoline as a by-product. You might notice that in the autumn the price of gas nearly always declines. Not only are people driving a bit less with summer over, more importantly, the refineries are cranking out heating oil (common in the east) which produces an over-abundance of gasoline as a by-product.

When you work with dynamic and living systems, as I do, one key aspect is that cause and effect are nearly always separated in both time and space. High rates of African-American male incarceration are one such effect of the $9 Trillion “War on Poverty,” which drove black fathers from the home.

You are correct about the implications of gas tax on consumer spending. But lefties will never see (or admit) that the persistent, grinding unemployment in 2021 is the consequence of their decision to raise taxes of any kind. In this case gasoline taxes.

A 1% increase in taxes generally decreases private sector economic activity by 3%. That’s from economist Christina Romer, an Obama administration official, not some hard-core anti-tax right wing outfit.

July 27, 10:30 am | [comment link]
7. evan miller wrote:

Lunacy.  When the gas tax has done its work and that golden age dawns when we are weaned off oil, what will replace the revenue that will be lost when gas consumption is negligible?  Another tax on something else, that’s what.  This is an asinine idea.

July 27, 10:40 am | [comment link]
8. magnolia wrote:

“Because if there’s one thing that really works, it’s price.”

true. but it will never happen. nixon, ford and carter could not break our addiction and reagan was a dealer/enabler, so…nope. won’t ever happen.

July 27, 12:00 pm | [comment link]
9. Charles Nightingale wrote:

Then you have to account for all the rest of the things petroleum is used to manufacture, such as fertilizer and plastics of all sorts.  This is more about control than it is anything else. This kind of trash is advocated by clowns who have zero common sense and no insight into how the real world operates.  We the people are too stupid to make good decisions, so the soi disant intellectuals have to make them for us.  Pah!

July 27, 12:28 pm | [comment link]
10. mppets wrote:

http://economics.about.com/od/taxesandeconomicgrowth/a/mileage_tax.htm
Basically reads, increase tax so people drive less. Less driving means less gasoline tax. Less taxes means we have to increase taxe rates to keep same revenue. Typical government thinking.

July 27, 12:33 pm | [comment link]
11. John Wilkins wrote:

An increase in raising gas taxes would inhibit some kinds of growth and spur others.  It is not a panacea, nor is it the holy grail. 

But we already subsidize cars through public investment.  The government spends money on roads, through taxes.  One alternative is to put tolls everywhere so that people see the real cost.

What does make sense is increase the tax to account for the missing externalities.  Driving costs the public in ways that are not easily accounted for, and are not reflected in the price of gas.  In sum, we get it cheap, because it’s already subsidized. 

The price should reflect the true cost of gasoline.  As it is, we are benefitting from a free lunch, and are whinging because we want everything to be cheaper than it really is.  Individuals (and businesses) pay cheap, but the public picks up the tab.

July 27, 3:00 pm | [comment link]
12. Paula Loughlin wrote:

Don’t the taxes on gasoline disproportionately burden the poor?

July 27, 3:37 pm | [comment link]
13. mannainthewilderness wrote:

Only if they are buying the oil on the open market are they limited to an 11-cent profit per gallon of gasoline, #3.  For big oil, the oil is free in the more established wells (they have already amortized the cost and depreciated the asset).

July 27, 3:51 pm | [comment link]
14. markfromdallas wrote:

John,

I am apparently confused.  Raising taxes spurs growth? Yeah, of government. 
Cars are subsidized through public investment?  Commerce is facilitated by having avenues for transportation of goods and people.  The government, through taxes, building and maintaining roads is hardly a subsidization of cars.
“Missing externalities”? HUH?
“Individuals (and businesses) pay cheap, but the public picks up the tab.”? The public is made up of individuals.  If the public is picking up the tab that means that the individual member of the public is picking up the tab.  How can it be that “individuals (and businesses) pay cheap” but pick up the tab too?
“The price should reflect the true cost of gasoline.”  Maybe you mean that the cost of transporting goods and the people who use those goods is more than just the cost of fuel.
See, I’m confused.
For those who worship the Earth instead of its Creator no amount of human inconvenience or suffering is too much to to bear if it means the environment is spared. And fewer people will help achieve that goal too.

July 27, 3:58 pm | [comment link]
15. Lutheran-MS wrote:

Liberals always want to tax, they would not be happy if they can’t find something to tax. But their leaders can fly around in private jets.

July 28, 1:09 am | [comment link]
16. robroy wrote:

Hold the presses. I agree with John on this one point: “But we already subsidize cars through public investment.  The government spends money on roads, through taxes.  One alternative is to put tolls everywhere so that people see the real cost.”

To answer markfromdallas’ point, “The government, through taxes, building and maintaining roads is hardly a subsidization of cars.” It is a massive subsidy of car transportation. When the government provides any service, real costs can be and most often are hidden. This is true of roads, potable water, etc. Now, of course, there will never be a free market for these commodities, but I am for trying to pass on true costs to consumers of these goods. This leads to increased efficiencies rather than spreading inefficiencies all around, i.e., taxing the efficient to subsidize the inefficient.

John talks about converting public roads to toll roads. We could more simply tax car and truck usage. In the end, a gas tax IS a car usage tax. But I agree with Bart Hall (of course) that increasing taxes hurts the economy. Thus, I would advocate the other taxes be cut, so that it is neutral. Again, it is a matter of passing on true costs.

July 28, 4:27 am | [comment link]
17. John Wilkins wrote:

#14 Not all taxes spur growth.  Some do.  After Clinton raised taxes we saw the economy grow quite a bit.  There are a few reasons for that. 

One is that it is an incentive for businesses to place money differently.  A higher tax on business profit combined with a tax benefit for hiring incentivizes a person to hire a worker rather than put it in savings. 

The issue is one of speed.  Saving - putting money in a bank - takes a lot longer to affect an economy rather than direct hiring.  Simply put there is a sweet spot number with regard to taxation.  Taxes should not be confiscatory, but provide an incentive for investment in hiring.

As it is, businesses are NOT hiring but investing in technology to avoid hiring workers.  This means that there will be fewer people who can afford to buy the products that businesses sell.  On an individual level, it makes sense for businesses to avoid hiring workers, but to outsource to places like India.  It does mean, however, that we’ve decided we don’t need a middle class because we prefer the religion of the market and the faith of supply-side economics.

If we were to take care of train tracks we’d be subsidizing trains.  Or, perhaps we ask that all drivers take care of the roads in front of their houses and pay for it.  My point is that we’ve made a choice that we want government to do something that facilitates commerce.  But we still pay the government, and the government collects taxes because it spends it on something that supports the private sector. 

By and large, if you look at real cases:  compare the economies of Ireland and Estonia with Brazil; or even compare Germany and the US, you’ll see different ways people make choices.  Brazil has both a commercial society and a modest welfare state, and it’s booming.  Germany has problems, but by and large it has a generous welfare state, nobody goes hungry, people are well-educated, and they produce the cars that people want.  Rich people.  Rich capitalists. 

I’m not saying I have all the answers.  I’m just repeating that there is a lot in between Cuba (as a communist state) and Somalia (a free marketeer’s paradise).

July 29, 12:41 pm | [comment link]
18. Capt. Father Warren wrote:

#17, “One is that it is an incentive for businesses to place money differently.  A higher tax on business profit combined with a tax benefit for hiring incentivizes a person to hire a worker rather than put it in savings. “
I would challange you to show any evidence for that because it makes absolutely no sense whatsoever.  I will hire a worker when the net contribution of that worker exceeds the cost of that worker.  Which by definition will add to my bottom line, which you are going to take away in increased taxation.
So, your increased taxation raises the bar for worker value therefore penalizing those workers of lower value. 
Any incentive you give me is a one-time option to lower the bar.  But as a business owner, if I am that stupid then I should go out of business (which I will do if I follow your line of reasoning).
Businesses do not hire people to cash in on govt tax breaks.  They hire people to add value to their businesses.
Since the future, tax-wise, is so very grim, that explains in part why you don’t see anyone hiring.

July 29, 6:40 pm | [comment link]
19. Albeit wrote:

Politicians simply can’t be trusted. Need a good example, as relates to this particular thread?  Read on!

Back in 2001, then NY Gov. Cuomo sold everyone a bill of goods on what he said would be “a 5 cent per gallon tax which would be placed in a locked box, for exclusive use in repairing and maintaining New York’s roads and bridges.” He went on to guarantee that it would remain, time and forever, untouchable for any other purpose whatsoever.

Really? Well click on this and see what happened to that “Political Promise.”  http://www.syracuse.com/news/index.ssf/2010/03/new_york_state_raids_dedicated.html

August 4, 9:51 am | [comment link]
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