Ray's Modest Proposal: A Graduated Gasoline Tax

If the goal is to stretch our available fuel supplies, I don’t know if adding cash to our government’s coffers is the way to do it.

I agree that adding to the cost of the fuel at the pump will encourage people to use less, or find more economical ways to use fuel.

My concern would be where the money went. I would not be the first to point out that our current administrations record with regard to oil and the conservation there-of is somewhat questionable.

What I would like to see is whatever disincentive that goes into the pump price go directly into exploring/creating alternatives.

Ray might be able to afford $6+ for a gallon of gas. I can’t. I already work at home and my husband’s commute is only 5 miles one way, which is lower than most people’s commutes that we know. If gas gets that expensive it’s going to hurt the economy because only the wealthy will be able to afford gas for their cars, and stores and restaurants will be closing for lack of customers, thus putting people out of work.

Sure, go right ahead, tax gasoline more.
As I zoom buy in my 29mpg Jeep diesel, I laugh, evilly.

Why is that?

This isn’t what I’d call a “graduated” tax where the more you consume the higher rate you pay. It is a tax that is phased in.

If I had any faith that the tax would be used wisely to create alternative transportation, I’d go for it, but I am skeptical.

Ray:

Get real. I hope your children don’t grow up to be Dimocrats too.

 I'm told that today Illinois and its counties and cities have the highest gas taxes in the U.S. Something close to a dollar/gallon is tax. With ALL the technology existing since the beginning of the Space Program (I remember the gas turbine engine came out around 1955!) America's dinosaur car makers still refuse to immediately put out a fuel efficient vehicle. Like the urban legend that General Motors and Standard Oil of California were in cahoots to get rid of L.A.'s trolley system in favor of freeways and cars Detroit says a solution is still years away.  But the Chevy B.U.V. Suburban is selling like crazy. At least Toyota, Honda and Nissan know what's up and they're not waiting. They have the technology and cars already to go. Ray's proposal is unfortunately unrealistic. It would hurt so many industries and businesses that only Uncle Sam would prosper. Nice try Ray!. Love your show. Been listening for a long time. Don't stop telling the truth, guys. America needs more programs that tell the truth.

As I recall, the guy who invented the internet proposed this and ended up playing second fiddle to Slick Willie.

I thought it was a good idea then, and I think it is now. The only issue I have is that I would want the money to fund development of alternative-fuel transportation systems, and a cash cow like that would be used for all kinds of other stuff.

Europe has very high gas taxes that dwarf ours, so it could be done. However, the public would not go for it.
The bridges of this county are in horrible condition and they need repair. If Congress were committed to paying for their spending with concurrent taxes then an extra tax could be used for bridge repair. But Congress being Congress & the Republicans spending more than Democrats, whatever they do will only be good for the short term, not the long term. Our kids will pay for our excesses.
So to answer your proposal, there will not be an increase in gas taxes, Congress will continue to take bribes and somehow some alternative fuel will slowly be developed (i.e.: ethanol). The poor and middle class will be forced to pay more for whatever is developed while the rich will find a way to write it off their income taxes so we can pay for their fuel use.
Have a nice day, Al

It is a very good idea, but must be coupled with an extra tax-deduction for lower-income drivers to offset how it would hit them in the wallet.

Further, the money collected in this proposal could go mostly toward alternative fuel research, highway maintenance, and perhaps even programs to offset the sad effects of Detroit’s incompetence vis-a-vis so many lost jobs in the auto industry.

Government is the solution!

A good idea in principle but a little steep in cost. Also, it will drive inflation.

“Government should NEVER have the right to control any part of the economy.”

Then maybe we should stop paying the oil industry $BILLIONs in subsidies. While we’re at it, we should stop spending $TRILLIONs waging wars to provide security for their pumping sites and shipping lanes.

After that we can start talking about a free economy, how much a gallon of gas really costs us, and the fairness of consumer taxes.

Agreed…

“I’m from the the goverment and I am here to help you”

One of the three great lies in society!!!

c

Given that your taxes already provide $billions in subsidies to the oil industry, and the fact that you use less gas than the average driver, you’re already paying for gas you don’t even use. I would think a more direct tax such as this might stand a chance of evening things out.

Or, maybe that’s putting too much faith in our “government for the sheeple.”

“So to answer your proposal, there will not be an increase in gas taxes, Congress will continue to take bribes and somehow some alternative fuel will slowly be developed (i.e.: ethanol). The poor and middle class will be forced to pay more for whatever is developed while the rich will find a way to write it off their income taxes so we can pay for their fuel use.”

That is so true.

The “free market” does not work for petroleum products. We are at or near “Peak Oil”. The “Market” can no longer expand to meet demand. Since prices are sure to rise tax or no, this vast revenue stream (we burn 45 million gallons of gasoline a day, 60% of which is imported) leaves our country and into sometimes not so friendly hands. If we tax ourselves to reduce consumption, the money stays here so we can spend it on ourselves. If we give it to the Arabs, it’s gone forever. The National Debt and the Budget Deficit are at record levels. A new tax that has the side benefit of reducing petroleum imports makes sense. “Low Income” people could file for relief on their Federal Income tax. When we import over 60% of our oil, we NEED to instill some pain at the pump. Gasoline demand has increased 2% so far this year over last year. There is a lot of whining at the pumps, but no real pain. $6/gallon gas, $95 fill-ups, should reduce gasoline demand somewhat…People will spend their last dollar on three things and gasoline is one of those things…Let me know when the high-school parking lots start to thin out…

While I agree with you in principle, I do have to point out that we do not get the vast majority of our imported oil for “the Arabs,” but we do get lots of oil from “the Canadians.” Just a clarification, it doesn’t really change the conclusion.

LOL, my daughter’s high school parking lot looks like a BMW dealer’s lot, it might take more than $6/gallon to thin that place out (the kids already pay about $50 per year for a parking permit, and most of them live within about half a mile of the school.)

Interestingly, this post was ported over, but only a few selected replies. I noticed that my reply was not posted over, but several replies to my original reply were. I’m sure some readers are a little confused about some of these relies and are wondering what they are talking about. So I will try to put in the gist of my original reply here.

The price of gas is determined by supply and demand. It always has and always will. Adam Smith detailed this in his book “Wealth of Nations” over 200 years ago. He has never been proven wrong. When people accuse someone or a group of someone’s of manipulating or controlling prices, it is not the prices they control or manipulate, its either the supply or the demand, or both.

The oil companies have been able to partly control the supply because the government allow so many mergers in the 90’s. Both parties had a hand in this. After Katrina, the equations for supply changed dramatically. There were fewer refineries after. Before the hurricane, the cost of shutting down the excess (in the oil companies view) were higher than keeping them open, but after, there was no incentive to reopen all of them.

The oil companies do not directly control demand, we did that to ourselves. From the 70"s to 1996, the CAFE (corporate average fuel economy) dropped every year. The result was a steady decrease in the price of gas. Starting in 1997, the CAFE slowly started up and picked up speed after 2001. The price of gas started up after 1999. After Katrina, it really skyrocketed. The price of oil on the world market contributed to this as well. A small decrease in OPEC’s output did this.

Now to my point. Oil companies a raking in a windfall because their costs have not gone up as much as the market price of gas. Some of their costs for the higher price of oil is off set by efficiencies of production at fewer refineries. An increase in the gas tax at this time would not significantly change the cost at the pump. it would come at the expense of oil company profits.

Everyday, the oil companies calculate the cost of producing a gallon of gas for each production level. The things that go into this calculation include all the costs of operating the refineries, storing the product at various stages of production, salaries, transporting and handling, etc. If they produce less gas, it costs more per gallon.

They also estimate how much gas will be sold per day at each price point. The higher the price, the less gas they will sell. These two calculations are plotted on a graph and the difference between the cost and price is the profit or loss. Somewhere on the difference curve is the highest profit for the day., and that is where the production levels and price is set. Each oil company has to do this independently and hope their competition draws the same conclusions. And they usually do.

Adding more tax does effect the equation, but it is not a direct addition to the price. The price could stay the same, or go up by less that the tax, same as the tax or more than the tax. In times of high profit, it is most likely to not go up significantly. The highest profit price for that day usually will not move significantly, unless the tax increase really cuts into the profits to the point of almost wiping them out.

To pick an arbitrary tax increase could have negative effects on the economy, but if the government did the same thing the oil companies did, adding a curve for various tax rates, the government could maximize their tax revenues, without putting the oil companies out of business. The could also control the price at the pump somewhat and encourage people to move to more to more efficient vehicles without massive disruption of the economy. The excess revenues could go to improvements in the infrastructure so gas is not wasted in traffic jams.

To further encourage the move to more efficient vehicles, the states could start basing their annual registration fees on the fuel requirements of the vehicle instead of the residual value of the vehicle. Starting with new vehicles, the fee would be graduated with the most fuel efficient vehicles paying the smallest fee and the fee going up for the excess fuel it uses. This would be paid annually for a fixed number of years, then dropped to the minimum when the vehicle has little life left and is probably owned by a low income person of family.

BTW, contrary to popular belief, providing money to cover operating costs of the government is not the primary intent of most taxes, it is the secondary intent. The primary intent of taxes is to control peoples behaviors. Only the income tax is primarily for raising money for the government, and some of the exemptions allowed are for controlling behaviors, i.e. charity giving.

Yes indeed, Canada & Mexico are our biggest suppliers, but they don’t set the price. OPEC, controlled by Saudi Arabia, determines the “market” price. We need to get serious about reducing demand of a product we don’t control. A punitive gas tax works. Vehicle mileage standards need to be raised too…

If we keep simply printing dollars to pay for our oil, one day soon those dollars won’t be worth anything and Americans savings will be wiped out. Never in history, NEVER, has printed paper money held its value very long…The people who control the printing presses just don’t know when to stop…

Of the top five countries that the US imports its oil from, three of them, Saudi Arabia, Nigeria, and Venezuela are neither politically stable nor friendly to the US. No one country produces as much oil as the US imports.

As for those other countries in the ticking time bomb/powder keg known as the Middle East (Persian Gulf), they’re selling all they can to Europe, Japan, China, and India. If something happens to stop or significantly cut the flow of oil from the Persian Gulf, those countries will come begging and bidding to Canada, Mexico, Nigeria, and Venezuela.