New Fuel Tax Suggestion

Maintenance/Repairs
41

Taxes with the goal of controlling consumption has been effective in controlling the smoking on the state level, and I believe would bee effective under normal circumstances. A dedicated consumption tax is worthwhile.

But, with fuel prices increasing"without bound" from a variety of pressures including, speculation, devaluation of the dollar, security as encouraged by our foreign policy. and general greed, nmow is not the time. Right now we are swirling towards a resession spear heqaded by energy costs.

Europe encourages the use of diesel by taxation at a lower rate. this is worth while control. I now think we are in a crisis with with our national security at stake with all future wars propigated on the acquisition of energy.

As an independent and a bit of a libertarian, I never thought I would say this…it’s in our national security interest for the Department of energy to nationalize the holdings of American based oil companies and at the very least, initiate price controls. We initiated govt. control over energy consumption duting times of war…we shoud do it again. Our entire existence depends upon the proper despensation and development of energy sources, The private sector, which is driving us into “energy retrieval wars”, and taken over our military industrial complex, has has failed us.

42

PS…please excuse in typing…recovering from eye surgery is a b…h ?

43

“But, with fuel prices increasing"without bound” from a variety of pressures including, speculation, devaluation of the dollar, security as encouraged by our foreign policy. and general greed, nmow is not the time. Right now we are swirling towards a resession spear heqaded by energy costs."

Gasoline prices increasing by a few pennies is hardly “without bound.” The current little blip in fuel prices has more to do with the weak dollar, speculation, and the usual OPEC manipulation than anything else. It appears to me that gasoline prices are swirling all the way from $3.00 to about $3.05 at the moment. When they hit $5.00, it will be good start.

44

Gas prices responding to seasonal pressures ? …Not happening. The pressure that it inflicts upon ther rest on the economy is the most damaging. It may be 3.05 where you are…it’s 3.50 here and climbing .05 a day on the average. We WILL see $4.00 a gallon this summer and we will still have the foolish govt. pumping billions into farm ethanol subsidies, the biggest joke of all, further increasing the price of basics. The increase in prices has as much to do with the continued devaluation of the dollar as anything.

THAT trend continues…“without bound” is the result. Buy all the economy cars you want…we will have little effect.

45

Actually, I drive diesels so I’m paying closer to $4 at the moment. My point is that U.S. energy (not just gasoline) is significantly underpriced compared to the rest of the world. The cost of U.S. energy needs to increase sooner or later, the sooner it starts the sooner it will start to drive down consumption. If we reduced oil imports it would do a lot to prop up the dollar. I’m much more concerned about the weak dollar than the cost of gasoline.

BTW, I agree that ethanol is little more than farm welfare.

46

Good summation of what is at stake here! About 45% of the US trade deficit is represented by the oil import bill, and getting worse. Oil just touched $110/barrel today, with the spring and summer demand to be felt yet. Classic economics don’t work when the value of your currency and energy security are key issues, and we are not even talking about the environment yet.

Wealthy countries without oil or a car industry, such as Denmark, Finland, Ireland, New Zealand, Singapore have always had to put artificial restraints on car ownership and fuel pricing, since the automobile, more addictive than any drug, can bankrupt an otherwise healthy economy if left unchecked.

A $20,000 car will incur about $20,000 worth of maintenance and repairs over its lifetime, and use about $20,000 in fuel at todays prices. If all that (except for the labor part of the repairs & maintenance) has to be imported, it will severy distort the economy of any country. That’s why in Japan cars are cheap but gas is expensive since the gas part is imported.

The US got spoiled because historically, gas, cars and parts were all domestically produced and did not affect the balance of payments.

47

I don’t agree that artificially inflating the cost to the end consumer is the answer. There are many reasons it will not work and there is also some history to show it won’t. As one example, people have already cited instances where the taxed money is not used as intended. I’d prefer to see some type of taxes placed on the profit made by the oil companies rather than the consumer. The government already has precendents in place for this type of thing in the way of cost-plus contracts. They control the amount of profit allowed on a project/program. Excessive profits could be heavily taxed. The companies still make reasonable profits to keep their shareholders happy and rules about passing these costs on to the consumer could be made. I prefer to attack disease at the root of the plant rather than the end of the branch…

48

“The government already has precendents in place for this type of thing in the way of cost-plus contracts. They control the amount of profit allowed on a project/program.”

I’ve worked on enough government cost-plus contracts to understand why they don’t work, the contractors bid low and continuously increase scope to maximize profits; government oversight is usually expensive and inadequate, they try to micro-manage the contract to try to control costs and they are always behind the curve. It is essentially a blank check, contractors love cost-plus.

However, I do agree that taxing the end user may not be the answer. I would rather see imported oil taxed at a higher rate than domestic oil. Taxing profits would not work because it would be too hard to enforce. I have a one person corporation, and I could easily hide my profits from the government, imagine what a big corporation could do.

BTW, we all know this isn’t going to happen anyway. The U.S. does not have the political will to make a serious effort, energy prices will increase on their own and it will not be predictable. In about 20 years we will be in the same situation with or without intentionally driving up prices, it will just be more painful if we do nothing.

49

I’m all for tough love but we have to make sure the cure doesn’t kill the patient. :wink:

I prefer the two pronged approach; market pressures to gradually wean people off oil along with an excessive profit tax on the industry. Let them make a reasonable profit but heavily tax anything above that. Use that money exclusively for research on alternative energy sources.

50

“…and we will still have the foolish govt…”

mconn, that foolish government is you. And me. No proposal goes anywhere without congressional and then presidential authorization. I believe that our elected officials would be willing to increase taxes if someone took them off the hook. If they thought that their next election hinged in a substantial way on this fuel tax idea, it would happen. They have found that the way to get reelected is to bring subsidies home by the barrel full while cutting taxes. Who does that please? Enough of the citizenry to regain their seats. Our representatives in Washington must love their jobs to go through the personally difficult process of getting elected and I must assume that they are willing to do a lot to keep the jobs they love.

51

“…along with an excessive profit tax on the industry.”

I can’t go along with an “excess” profits tax. Define excess. I don’t think that’s possible. There are low profit times when the industry streamlines. There are high profit times when it expands. If their higher-than-normal profits are taxed, how will oil companies afford the refineries, drill new wells, and find new reserves?

52

Mr. Mconn, you live in a make believe world. Oil prices are driven by world-wide demand; the US consumes 20-25% of the world total. A century ago countries went to war over resources, the Brithish Empire was a good example, and sending the US marines in to secure bananas in central America was accepted.

At this stage of globilization (the 21st century), no one country can control or set the price of any commodity. Any US company abroad that throws its weight around will be in danger of NATIONALIZATION. Mexico (1938) Venezuela (1970s), Saudi Arabia (1970), Ecuador, Bolivia, etc, etc, all nationalized US holdings, even without the threat of fixing prices.

I am as much a libertarian as you are, but the way for the government to control consumption is to tax consumption and rebate those taxes in the form of lower income taxes, and investments in research for alternative energy.

Countries that tax gasoline consumption sucessfully are: Great Britain, Ireland, The Netherlands, Belgium, Luxembourg, France, Germany, Spain, Portugal, Italy, Swizerland, Iceland,Chech Republic, Denmark, Norway, Sweden, Finland, Japan, Singapore, Korea, New Zealand, and many more. In other words, virtually the entire DEVELOPED WORLD! Countries that should tax gas more are Canada, the US, Australia, Venezuela (currently subsidized) Saud Arabia, Iran and most of the Middle East.

53

BTW, we all know this isn’t going to happen anyway. The U.S. does not have the political will

Said but very true. In addition it is not going to happen that the politicians would allow all that tax money to be returned to the taxpayers.

I made the suggestion as what I believe would be an effective, fair and just way of dealing with the subject. However I was not under any impression that it would be a realistic option.

54

“I made the suggestion as what I believe would be an effective, fair and just way of dealing with the subject. However I was not under any impression that it would be a realistic option.”

I understand, I think we are all just going to have to watch this train wreck.

55

I should have said… “Unintended effects of legislation ‘that are completely unforseen’…” What can hurt is what we don’t know, and the effects of tax changes of this magnitude can never be completely predicted. There are many examples of small changes to the tax code making extensive economic changes–completely unforseen.

56

This has been beat to death on this board and the old board

http://community.cartalk.com/posts/list/29823.page

It appears the old board is now longer available for research anymore.

Basically what you are going to do is increase the amount of government in your life without any real benefit.

But this is the real world and let me tell you what would really happen to the money that is collected.

The first few years you?d see the money going back to the consumer after the government took a cut for collecting and distributing the tax, then a little just a little would be used for a ?worth while project? say alternative fuel research, or some other project. Of course the money going to the poor and middle class wouldn?t be effective, only the ?rich? would see a reduction. Then there would be more projects and the line where ?rich? is would be slowly lowered, until the government would keep all the money, and then magically the money would be put in the general fund, all the while the tax would go up and up. Don?t believe me. Look at SSN, the government had a huge pile of cash coming in and they spent it, oh they bought government t-bills and then spent the money. But the funny thing is if one government agency owes another government agency money it doesn?t count toward the deficit. Now not only did you pay into SSN, but now you have to pay back the t-bills too, with your tax dollars. So in total you?re going to be taxed twice for SSN.

If the government is give money they will find a way to spend it.

My opinion is subject to change with new facts.

57

Excess is easy to define. For example, let’s just say it’s set at 15% after taxes. Anything above that is excess.

We must be seeing different news reports. The industry just recorded the highest ever profits in their history and the refineries now claim there is no money in refining gasoline. The cost/barrel must be below $100 for them to make acceptable profits. As far as investment, they aren’t making any. Recall the last “crisis” after the hurricanes. No backup systems in place, down for scheduled maintenance and we’re in between summer/winter blending so… tough noogies. There’s no lack of excuses on their part. This profit “bubble” has existed for a long time now and there’s no inkling of further investment in either expansion of the existing infrastructure or alternative fuels. Why? No incentive. Their nicely (insanely) profitable as it is, why waste money on such things?

58

Look at this from the point of view of their board of directors. Their responsibility is to maximize the returns to their shareholders. They are in the business of selling an international commodity with a very volatile price. Many factors out side of their control (and the control of any single government) affect the price on any given day. They are also looking at infrastructure that costs billions of dollars, can take about a decade to build, has many regulatory requirements, and has a fairly long payback time (even when prices are high).

When they have a good year (or a good decade), they have to decide what to do with those profits. One option would be to invest in new infrastructure for production/refining their existing product, another would be to invest in alternative energy project (to secure their future, to take advantage of any tax benefits, to get some nice PR, etc.). Another (safer) option is to invest some of that cash elsewhere to diversify their risk. They may decide to use those profits to invest in another part of the world that has more potential for growth. Of course some of those profits are going straight to the stockholders, including the principals who are holding lots of stock. In other words, it’s just like any other business. If you had $100K of your 401k invested in energy stocks (which you may), what would you want them to do differently?

If the U.S. government wants them to behave differently, they simply have to change the rules (i.e., the tax code) to encourage/discourage certain behaviors. If they want more investment in alternative fuel or more domestic production, create a tax credit. If the incentives are correct, they will get results; if the disincentives are too drastic, the investors will go elsewhere in the world with their money. If the regulatory process required to build a new refinery or drill a well is too difficult/expensive, they will build it elsewhere or not build it at all. If the regulation/taxes/labor cost/etc. are too burdensome, they will relocate the entire operation elsewhere (sorta like the auto companies are doing). If the government decides to tax profits, the profits will disappear and be invested someplace else (maybe not where the government would like).

It is not the responsibility of these companies or their stockholders to ensure an uninterrupted supply of energy at a favorable price to the U.S. public, that’s why we have governments.

59

Craig 58…please remember that comparing Europe’s cost of fuel to ours is illogical. The cost per gallon for the fuel proper is the SAME. They CHOOSE to pay consumption taxes as high as 70% (ours about 30% combined) to support national health care and public transportation. This is a position I feel we rightfully not choose because of our land mass and chosen independence that we could not afford. We prefer higher non consumption taxes to meet our needs. Our land mass helped win two wars, their lack of puts them at risk but makes them prime candidates for public transportation.

Sorry, a BOGUS comparison. An energy tax structure that encourages diesel consumption (lower) as they do, is worthwhile…please though, take European fuel prices our of it.

A Fiat Strata (remember) could last a European for ten years and 50K miles. We have people that put 50K miles a year on a car. Apples and oranges.

60

I can’t go along with an “excess” profits tax. Define excess. I don’t think that’s possible. There are low profit times when the industry streamlines. There are high profit times when it expands. If their higher-than-normal profits are taxed, how will oil companies afford the refineries, drill new wells, and find new reserves?

Problem is the oil companies are reaping in the largest profits EVER…for any US company EVER…and they are NOT building new refineries…they are NOT updating their refineries…they are just taking their 1-2 MILLION DOLLAR PROFIT PER DAY PER REFINERY and running with it. Then 5-10 years from now when their profits are low (only $500k per day per refinery)…they’ll be complaining that they don’t have enough money to update their refineries.