After Further Review, I Support an Increased Gas Tax


As painful as it will be, I think the best thing for America's long-term energy future is an increase in the gasoline tax.


My wife and I have a big Mormon family, so we have a big Mormon wagon--an SUV. We calculated the cost to drive the thing a couple months back, and it shocked us. At least 25 cents per mile. And that's just for gas. So it is with some trepidation that I agree with Jay Evensen of the Deseret News that we need to raise taxes on gasoline.

...increasing [the gasoline tax], with the extra money going to encourage alternative fuels, would be a good way to begin weaning the nation off its dependence on foreign oil and to take power away from oil-rich despots.


As I discussed the article with my wife, she made an interesting observation. If it meant producing our own fuel rather than relying on the unpredictability of world markets, she would be completely in favor of paying four dollars for the alternative fuel equivalent of a gallon of gas instead of three dollars for a gallon of gas from a foreign country.

I've said some disparaging things about ethanol in this space recently, but the one thing that it does have going for it is that it can be produced locally. That probably offsets the fact that it doesn't pack as much punch as gasoline. With research, I'm sure its power can be harnessed more effectively.

I'm not sure if it was true, but I heard recently that as international market oil prices went up, several research and development firms began researching alternative fuels--but then they stopped researching when OPEC glutted the market and the price went down. At any rate, the economics of such an anecdote is clear: as the price of a product increases, the desirability of a substitute for that product also increases.

This is one of the reasons why I support a gasoline tax increase (the other is because those who use the roads should pay for them). Not because it will be easy in the short run, but because it makes sense for America to be energy independent. The way we become energy independent (besides drilling in ANWAR--which I support as well, by the way) is to make it feasible to expend the effort to find alternative sources of fuel. Increasing the cost of gasoline will do just that.

Comments

  1. Right on, Frank. Think where we could be if we had followed your thinking 10 years ago--we would be far more energy-independent, and we might have bitten some bullets about conservation and efficiency at price levels that were easier to digest. We've got to get there someday. Why not now? How can we continue to rely on Mideast oil in these times of instability? It's nuts. Right on.

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  2. While I also support a gas tax increase I strongly disagree with your plan for a federal increase in gas taxes.

    The Utah Taxpayer's Association has been agitating for an increase in gas taxes along with implementation of congestion pricing and other ideas to decrease the number of miles driven on our roads and to ensure that more of our transportation costs are paid by those actually doing the driving. Their proposal calls for a decrease in income taxes to maintain revenue neutrality (It wouldn't be like UTA to lobby for an actual tax increase) along with refundable tax credits to ensure the poor aren't unfairly burdened with this new tax.

    Here's a link to their original gas tax proposal...check the other posts as well for more information. I really think they are on the right track.

    http://utahtaxpayer.blogspot.com/2007/05/raise-state-gas-taxes-cut-income-taxes.html

    Evansen's proposal that we allow the federal government to tax us more for gas so the feds can spend it on "alternative energy solutions" is a different story. The federal government rarely does a good job "encouraging" innovation. What would really happen is that the money would be included in some omnibus bill full of earmarks for corn museums in Iowa or some such foolishness. Past performance by our government doesn't provide a lot of hope that the new money will be spent the way any reasonable American thinks will be beneficial.

    The assumption that the higher gas prices resulting from a tax increase would encourage innovation also doesn't seem very realistic. Europeans have been paying a fortune for gas for decades because of crazy tax levels and still most innovations in fuel technology over the past 50 years have come from the U.S.A where our prices have always been relatively low. I think that the bottom line is that government isn't going to provide us with answers to this market based problem.

    I agree with you that new solutions need to be developed and I believe they will but I definitely don't think that the artificial increase in gas prices brought on by an increased federal tax is going to be part of the solution...even with the fed's promised support for alternative energy solutions.

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  3. I think raising the gas tax is a good idea, but not for most of the reasons you raised. My biggest problem with gas taxes is that they have been losing buying power by not being inflation-adjusted. This is a big problem since, in our current environment, the cost of construction materials has been increasing much faster than inflation. This is totally unacceptable.

    I agree that the gas tax is fair because it's like a usage fee. As such, we should raise it to the point that it covers all road maintenance costs and some costs for new construction and expansion (though, conceivably, it would be more fair for those costs to be levied on the purchasers of new homes).

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  4. Greg, if we had followed Frank's plan 10 years ago we would still be no closer to having viable alternative fuels, but be would have blown bucketloads of taxpayer money on ultimately useless activities (see Jeremy's comments). Due to the nature of bureaucratic organizational behavior, we simply don't derive much actual value from increased federal taxation.

    Like Jesse, I have no problem paying a user fee to help cover actual road costs. But I'm not sure I'd go all the way to having it cover 100% of the costs. Why? Because a highly regressive tax is going to make transportation too expensive for those at the lower end. Making transportation too expensive for these folks essentially eliminates many job opportunities for them. We'd rather have these people working than not, so I'd shy away from a 100% use tax on roads.

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  5. Good points all.

    I didn't research, let alone think much about that the Feds would administer the tax (although I probably should have, because Jay Evensen implies that). My perspective was that the tax would be administered by the states, and probably SHOULD be used to improve our roads. (i.e. what Jesse said that it could be like a use tax.)

    My main point, though, was that an increase in the price of gasoline will cause people to look more diligently for alternative forms of fuel.

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  6. Not a bad proposal, but first Americans will have to let go of the idea that we are entitled to cheap gasoline. In Europe they pay the equivalent of $6-7 a gallon.

    Let's just make sure the gas tax doen't go for more subsidies to the oil companies, OK? And forget drilling ANWR, it's not going to happen.

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  7. I have lived in Europe, and the high price of gasoline has not yet spurred innovation in the alternative fuel market. What makes us think high gasoline prices will make that happen here?

    Before people go touting corn-based biofuels, I strongly suggest they read Jesse Harris' post about corn. The overall cost and environmental impact of ethanol production makes it unsuitable as anything but a fuel supplement.

    Economics dictates that when the feasibility of using oil for fuel diminishes enough to make alternatives viable, viable alternatives will emerge via the free market. Although we think we're paying a lot for gasoline right now, the fact is that it would have to become vastly more expensive -- many times more expenssive -- before the market would produce viable alternatives.

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  8. The primary difference when it comes to European fuel taxes is that they are used primarily to heavily subsidize public transit instead of maintaining roads and highways. This is in part due to the compact nature of European cities and abundance of walkable neighborhoods. Because driving isn't as necessary as it is in the United States, not many people mind that it's expensive. The European system isn't much better or worse: it's just built around a different living pattern.

    I can see the point that 100% financing of roads could be unnecessarily regressive, though I would like to see much more of the burden shifted towards drivers. (Easy for me to talk; I purposefully bought a house close to where I work so I wouldn't have to pay out the nose for gas at any point.)

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