Federal Gas Tax Increase

December 8th, 2008

It’s time for an increase in the federal tax on gasoline retail sales.  It should be increased from the present 18.4 percent to around 50 percent.  Just writing that sets my teeth on edge, but, nevertheless, it’s time.

I don’t usually favor tax increases.  I believe government should tax less and do less, in general.  “That government is best which governs least” is a wise philosophical underpinning for society’s view of the role of government.  There’s disagreement on who among history’s wise men said it, but the wisdom inherent in those few words is timeless.  And aside from the Constitution, one of the only realistic ways to limit the reach of government’s long arm into our lives is to limit the amount of money we permit it to take away from us.

So, why increase any tax, including the federal gas tax?  Because it’s a special case.  As stated in an insightful editorial in The Washington Post today, this particular tax

…would stimulate the market for new fuel-efficient cars; defund mischief-making petro-states; and cut carbon emissions. Not only that, it would reduce traffic, curb urban sprawl and, by giving drivers an incentive to drive more slowly, improve highway safety. …

A higher gas tax would buy valuable public goods: national security; a cleaner environment; and safer, less congested streets. No matter what, Americans will have to pay for all of that. Why not do it the simple, straightforward way?

Of course, gas taxes are regressive.  That’s a term used by some politicians and economists to say that something is bad because everyone pays the same amount, or the same percentage of something.  However, the regressive nature of the tax can be offset by tax rebates, even though the size of gas tax rebates and to whom they are sent will inevitably be another source of contention.

Don’t get me wrong; I still don’t see a lot of difference between taxation and armed robbery.  In both cases, money is taken from me by threat of force, and I don’t have much individual choice in the matter.  And in either case I’m sure that at least some of the money extracted from me is going to be used for things I don’t approve of, such as studying cow flatulence, supporting obscene crackpot “art,” or buying crack cocaine.

But, still, increasing the gas tax is a good idea.  Read the whole editorial in The Washington Post.

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8 Responses to “Federal Gas Tax Increase”

  1. doris |

    NOOOOOOO! NO more taxes,especially on gas. We just got the prices down.I think this tax will not be used for all that good,probably just given back to auto makers for their bad business practices, to bail them out. You can’t trust that the government will use this tax for good??? Trust them? Not me.

  2. MaxedOutMama |

    You’re dead wrong. It wouldn’t stimulate any market. Instead it would accentuate our economic problems. Nor would it cut gas consumption.

    What any significant increase in gas taxes would do is cause the vast number of moderate to low income US drivers to move into larger, gas hog vehicles.

    But since a sober headed person like you thinks this is a good idea, I’d better explain in detail.

  3. Tom |

    I know there is strong opposition to increasing gas taxes. In fact, the opposition is so strong that I doubt Congress, including members of both parties, would ever pass it. It’s one of the numerous “third rails” of politics.

    One way or another, thought, we’re going to have to drive more fuel-efficient vehicles, reduce our reliance on foreign oil, reduce the amount of wealth we’re transferring to oil-producing countries, improve environmental conditions, reduce the amount of energy we’re using–all those things. This particular tax provides a powerful incentive to change in the right direction.

    I realize that a tax like this falls most heavily on small business people (like Doris) and the poor. However, there’s no way it could ever be enacted without a rebate program that compensates small businesses and the poor for their added costs. It can be said that the tax is then pointless because it will be returned, reducing the incentive to consume less gasoline. That’s not true. Higher prices alone will discourage consumption and encourage the changes necessary to maintain lower levels.

    The truth is, the prices Americans pay for gas now is nowhere near historical highs in constant dollars. Even at the highest prices of the recent past, at worst it was at about the same as historical highs. Most of the rest of the world has long paid much higher prices than in the U.S., commonly twice as high or higher. People who are less wealthy than Americans long ago learned to live with higher gasoline prices, and the world didn’t come to an end.

    Something will have to be done. Would you rather pay a higher tax that lets people decide on their own how to live with it, or would you rather have central planning zealots like Nancy Pelosi and Harry Reid dictating to major industries what kinds of products they can design, build, and sell?

    My default position is always in favor of individual freedom of choice, and I don’t think we can solve these problems in any other way that preserves that freedom.

    MOM, I’m always reluctant to argue with you on issues like this! I look forward to reading your views in detail.

  4. MaxedOutMama |

    The short answer, Tom, is that it will have the opposite effect because it deflates the cost of low-mileage vehicles, and thus in a credit-constrained environment, prevents fleet replacement.

    Total cost of running a vehicle = capital cost, operating costs, repair costs, & insurance. The biggest barrier to most Americans is the capital cost. Raise gas taxes and rebate, and you are literally funding the purchase of lightly used, very cheap low-mileage vehicles.

  5. Tom |

    MOM, I hear you, but I’m not sure about some of it. All fleets turn over after a period of time. Early replacement of some types by businesses, especially small businesses, during the initial tax period can be covered by rebates on a one-time basis, adjustments of depreciation rules, or special deductibility provisions.

    As far as effectively funding the purchase of low-mileage vehicles–well, isn’t that something we want to do? And again, that’s in the initial period. Perhaps then we’ll also be able to dump this stupid idea of $7,500 we’re going to pay people to buy hybrids, and that would be a good thing.

    This still seems like a good idea, even though tax gains are offset in the early period by these initial requirements. But revenue increase for the government isn’t even the main idea–that’s to create economic incentives to change individual behavior in terms of oil consumption.

    I’m sure this is just an academic discussion. Politicians don’t have the guts to do the really hard things, like gas taxes, Social Security reform, control of spending, etc.

  6. MaxedOutMama |

    Tom – I’m way too dazzled by the 78 page Blagojevich complaint to finish a long post about this.

    What such a policy would do is fund the purchase of gas hogs. Low-mileage vehicles = gas hogs.

  7. Tom |

    Oops, sorry! I guess I mis-read that part. Maybe I was thinking “low-consumption.” I think the rest still holds true, though. And if people are getting rid of gas hogs because of gas prices, why would they buy more of them even if they cost less? They might for a while, I guess, but I think things would settle out pretty soon.

    I agree about Blagojevich. I haven’t read much of it yet, but I heard some on CNN. Makes Governor Spitzer look like a choir boy!

  8. Opinion Forum » Blog Archive » Big Brother in Oregon |

    […] the record, as I’ve written elsewhere, I support increasing federal gas taxes by a reasonable amount.  It’s simple, easy to do, […]

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