Old Fuel Tax Suggestion

This suggestion grows out of the excellent discussion generated by our good friend Joseph Meehan concerning fuel taxes. Docnick suggested that a gas guzzler tax should be created. But we already have one. It pertains to cars only. I propose that we write our legislators in DC and suggest that the gas guzzler tax be expanded to include SUVs and pickup trucks. The fare would be the same as cars, which goes from $1000 to $7700 per vehicle. If a large number of people contact their representatives, it might have the desired effect. I will contact Elijah Cummings, Barbara Mikulski, and Benjamin Cardin from Maryland. This is worth doing. I hope that you will join me. Let know if you will or won’t and why. Your reasons are important.

The only problem with the gas guzzler tax is that its a one shot tax. Now if the annual registration included a gas guzzler tax, people would really think twice about that. This should replace the “value tax” that many states use.

Yes, in my proposal was an annual usage tax based on engine size and weight; in France a small 4 cyl car has an annual fee of $60, while a Range Rover V8 would incur $2000 per year usage fee.

In Holland, a Jeep Grand Cherokee with the 5.7 Hemi sell for just under $100,000 mostly because of various duties, gas & weight sales taxes. A VW Golf sells for about the same as in the US.

That would work, except for the inevitable loopholes. I’m sure there would end up being an exemption for small businesses, so everyone who owns a business (lots of people) would just buy whatever they wanted through their business. I’m also not sure a $2K annual fee would have much effect, most people would just grumble and write the check.

I still support consumption based taxes and here’s why. Your proposal penalizes everyone equally, regardless of how much fuel they actually consume. A person who buys a truck for a legitimate purpose and puts only a few miles on each day is charged the same as someone who buys the truck for aesthetic reasons and commutes 200 miles per day. Is that fair? Does it address the root issue?

People who drive with big engines already pay more in taxes because they consume more gasoline.

I see the usage taxes in other countries as simply a revenue generator from people they know can afford it. If you can afford to buy an expensive vehicle and consume more than the average amount of gasoline, then you can probably afford to pay a tax on it. Another form of opportunity based wealth redistribution.

“I still support consumption based taxes and here’s why. Your proposal penalizes everyone equally, regardless of how much fuel they actually consume. A person who buys a truck for a legitimate purpose and puts only a few miles on each day is charged the same as someone who buys the truck for aesthetic reasons and commutes 200 miles per day. Is that fair? Does it address the root issue?”

That’s a very good point; you wouldn’t want to beat up the person who actually needs a big vehicle but only uses it when necessary, as opposed to most of my neighbors who used 5000 pound/15 mpg SUVs as daily commuter cars (one of them uses a full size H1 hummer to bring her daughter a few blocks to the elementary school every morning, it’s almost funny).

“That would work, except for the inevitable loopholes. I’m sure there would end up being an exemption for small businesses, so everyone who owns a business (lots of people) would just buy whatever they wanted through their business.”

Why should there be an exemption? Limousine services pay the gas guzzler tax on their cars, why should it be different for truck owners?

“I’m also not sure a $2K annual fee would have much effect, most people would just grumble and write the check.”

Maybe not. But it will provide a revenue stream that did not exist before, and we need more revenue at the federal level just now. If the average tax is $3000, then the Feds would collect $3 billion for every million vehicles sold. It’s not a huge number in terms of the federal budget, but it’s a start. And as Docknick suggested, it could be an annual fee. If annual, it would be well over $20 billion in a very few years. That exceeds the annual budget for a few small US government agencies.

One rationale for heavily taxing the purchase of new thirsty vehicles is to keep them out of the used car pool.

Most car buyers buy used cars; when I look at the weekend paper, there are far more gas guzzlers for sale than small frugal cars, based on past buying patterns. Used car buyers collectively have no choice as to what is available.

With respect to private vs business use, all expenses are tax deductible, and the total cost of doing business is passed on to the market.

We need both a purchase and an annual ownership penalty, but the gas guzzler owner who drives little will not have a large gas bill, and he will benefit from lower income taxes because of all these levies.

Why do you folks who obviously are not commuters always want to tax the problem away? It simply does not work. Gasoloine prices are already laden with taxes. And even with gas at over $3.00/gallon people are still buying SUVs for their trips to the grocery stores.

Such taxes cause those who can least afford it the most pain. Let the free market work for a change. This is not worth doing…it’s a terrible idea.

I’m curious, JT, since you’re so intent on taxing us to death, what do you drive for vehicles? How far from your home do you work?

It’s obvious why you’d see more gas guzzlers in the paper now. These things tend to go in cycles and when the cost of fuel peaks, people tend to dump the big rigs.

You’re right, the cost of doing business is passed along to the consumers. So who is really hurt most by this?

Lower incomes taxes? I’m skeptical. In all my life, I have yet to see any tax go away or be reduced. They always seem to find new and exciting ways to squander our money…

I don’t know about JT, but I drive about 40K miles per year and spend about $6K on fuel. Regardless of our individual situations, something does need to be done to drive up prices significantly. The “free market” does not seem to be working in this case because the current cheap fuel and high consumption are having widespread political and economic impact. It is not reasonable to expect individual consumers to change their behaviors in response to these “big” issues (I’m unlikely to do anything different unless the cost of fuel at least doubles).

Thanks for responding Craig.

I’d disagree that the fuel prices are cheap. If the price alone is compared to prices in other countries such as the UK the price seems cheap, but if the cost of gas as a component of the cost of living are compared, the burden is not disproportionate in the UK. Many of the things UK citizens take for granted such as higher education, health care, and housing, that are paid for or subsidized by the government, we have to pay for ourselves.

Yes, they pay a much larger portion of their income to the “crown”, but their basic needs are taken care of. The proposal people keep bandying about is to add to our tax burden to artificially control demand without those added taxes alleviating any of our burdens. Comparing the cost of gas here to the cost of gas elsewhere without taking the overall economic structure into account is, IMHO, unrealistic. That would have widespread economic and political impact, and I think it would be adverse. D.O.L. statistics as well as the stock market would indicate that we’re currently on the brink of a recession. Artificially raising gas prices with an added tax is, I think, a poor idea.

To the working folks: if you want to drive up prices across the board, accelerate inflation, and increase unemployment and interest rates, then support added gas taxes. Every single good and service needs to be transported. And the cost will be either passed on directly to you or offset with layoffs…in many cases both.

I find these fuel taxes discussions quite humorous. Not because they won’t work (they very well may) but simply because Americans are proposing INCREASING taxes. Didn’t your forefathers host the Boston Tea Party because they didn’t want to pay tax on tea? Didn’t they start the American Revolution because they didn’t want to pay a half penny more for stamps? American history is littered with revolts when the government increases taxes, indeed, you (collectively) still complain you’re taxed too much.

Yet now you’re talking about increasing the fuel taxes to decrease fuel usage. Since when did you guys become London mayors? I think, if the government dramatically increased fuel taxes as suggested here, there would be another revolt. Despite the rational benefits (decreased usage) I think most Americans would be extremely angry, not to mention the poorer people would be broke (especially farmers and those living in rural areas) and the rich, well, they wouldn’t care. If anything, it create a larger gap between the rich and the poor.

Let’s face it, fuel is a necessity, especially among rural residents where there is little to no public transportation, and everything has to be driven to. If your logic is correct, then why don’t we also have a huge food tax to reduce the amount of food consumed by you Americans so Africans can eat. I think you will all disagree about a arbitrarily huge food tax - a similar fuel tax is equally harmful and revolt-causing.

By the way, I’m not going to write to my congressman to support such a harmful idea for two reasons: 1) I don’t agree with it, and 2)I live in Ontario, Canada. By the way, we get taxed quite heavily, but we don’t complain (at least not as much as you Americans.) We get free health care, our roads are relatively well maintained and always plowed in a timely fashion, we get free elementary and secondary education, and post-secondary education is partially subsidized (and even if student’s don’t have enough, the government lends us all we need, and gives us great interest rates and timeframes to pay it back.) I would rather be a working class, high-taxed Canadian than a working class, low-taxed American.

I wanted to add that the free market is working. It may not be giving the results that some would like, but it’s working. Demand will always adjust to supply until cost satisfactory to the marketplace is defined. It’s like physics, it may not always give the result we want, but it’s laws are absolute, universal, and always in effect.

It’s artificially messing with the free market that causes problems.

“Why do you folks who obviously are not commuters always want to tax the problem away?”

I don’t think anyone hates commuters. Also the subject tax of this thread could even help the commuter by encouraging them to buy more fuel efficient vehicles.

Taking it a little further, I do feel sorry for those with long commutes. Commutes are a waste of time and money. It is not always easy to have a short commute. However in the long term, the commuter who now has a long commute can chose a less expensive form of transportation or in the longer term, the choice of where to live and where to work.

Each of us can ask themselves, how far away would you commute? I had a friend who commuted across three states. He started doing it once a week and then once a month. In the end that turned out to be too much time away so he quit and got a job closer to home that paid less. He also could have chosen to move, but that would have been even more disruption for him.

It is IMO unfair to suddenly hit someone with a big change of this type. But certainly extending the gas guzzler to vehicles that are primarily used the same as cars, is fair and may benefit the car buyer be encouraging them to make a more economical choice.

I drive a VW diesel that gets about 50mpg in the city and low 60’s on the road. I bought it in 2002 when I worked at a job where I have about a 20 mile commute. For about half of my working time, I have chosen to live and work close enough to walk to work. It has become harder and harder to do that. I suspect if the cost of transportation continues to rise, we will see a reversal of those changes making living close to employment more practical. I have had small high mileage cars all my life. My first car was a 1965 (I bought it in 1966) Sunbeam Imp, I got over 40 mpg.

I do understand the economic impact, but the fact remains that the U.S. is consuming about twice as much oil as it is producing, and that is not a sustainable condition. It appears to me that oil consumption will inevitably be reduced either through government action (taxes or mandates) or through market forces driving the price up (primarily due to consumers in other parts of the world). This condition will not exist in 50 years.

At this point U.S. policy makes still have a choice, they can take action to reduce consumption in some kind of orderly fashion (taxes, import duties, serious mileage limits on vehicles, annual fees, etc.) or they can do nothing and wait for prices to significantly increase on there own (probably in big, unpredictable jumps). I do understand that they will probably continue to do (almost) nothing and our kids will have to deal with the economic consequences. The bottom line is; do you want to live with a controlled economic slowdown now or do you want to deal with a bigger impact in the future. Pay me now; pay me later.

Whether or not U.S. fuel is “cheap” in absolute terms (or compared to the rest of the world) is not really relevant to the policy question. The only things that matters is the fact that we use too much and/or produce too little. Realistically, I do not see U.S. production increasing enough to make a real difference, at least not at $100 prices.

Europe does have some advantage with their heavily taxed fuel, if/when the “stuff” really hits the fan and actual fuel prices increase, they will have the option of adjusting the taxes to control the rate of increase. The U.S. consumers will take the full hit, then we really will have to worry about recession, inflation, unemployment, etc.

I do not think that leaving this problem for the next generation is responsible.

“It is IMO unfair to suddenly hit someone with a big change of this type. But certainly extending the gas guzzler to vehicles that are primarily used the same as cars, is fair and may benefit the car buyer be encouraging them to make a more economical choice.”

I agree that any change of this type would have to be very gradual to give people time the adjust (buy different vehicles, move closer to their work, work closer to their home, find alternate transportation, decide they can live with the increase cost, move to another part of the world, whatever they choose). It’s an individual choice, I once spent two years “commuting” from CO to NY every weekend to support both my family and career. If you give people a little time (maybe 10 years) of gradual implementation, the “free market” will adjust. A slow implementation would also minimize the inflationary effects.

“If your logic is correct, then why don’t we also have a huge food tax to reduce the amount of food consumed by you Americans so Africans can eat. I think you will all disagree about a arbitrarily huge food tax - a similar fuel tax is equally harmful and revolt-causing.”

Actually, the U.S., canada, and EU should all reduce/eliminate their farm subsidies so that third world farmers can actually compete in the world agriculture market, but that’s a different subject. It is interesting that the U.S. is using food exports to partially off-set the trade deficit caused by energy imports. If we weren’t dumping cheap food on the world market, the dollar would be even worse off (it’s already on a par with the loonie and getting it’s ass kicked by the euro), another condition that is not sustainable.

Of course, your gradual implementation makes sense if people have the choice to move or change cars or whatever. What about the poor, who can only afford to live in rural areas, and drive older, less efficient cars because they haven’t the money to pay for higher urban housing, a newer car, higher insurance premiums, etc. These gas taxes will kill those who can’t afford them, and those who can won’t care that much. Not to mention, the only people who will change habits are those that can afford to, but they can likely afford not to change anyway.

"it’s already on a par with the loonie "

Actually, as of today (Thursday March 13) the loonie is worth more than the American dollar (1.015 or something like… similar to our gas prices.)