I listened with interest last Saturday as you once again called for a gasoline tax designed to help curb demand and create a revenue source for funding alternative energy development. Yes in fact, in economic terms, there is demand elasticity with price for motor fuels. This was demonstrated as far back as the middle 70?s and perhaps earlier, at a time when it was broadly thought that such elasticity did not exist. A graduate student at University of Rhode Island proved the relationship in a research project for a finance course.
Your proposal broadly makes sense as far as it goes. On the other hand there is a much better alternative available that would accomplish many of the same things plus several more. That alternative would be an oil import tax. Such a tax would be graduated to increase the tax burden on oil imports as the price of crude oil falls and reduce the burden as the price goes higher. The logic is this, when crude oil prices are high, alternative energy development can more readily stand on its own but when crude oil prices fall and those alternative energy efforts are no longer viable, a crude oil import tax would provide funding for those alternatives.
When oil prices are high they create a significant drag on the economy. In such times fixed gasoline taxes on top of already high oil prices, while having the effect of further curtailing consumption, also has a negative impact on the economy and therefore people?s livelihoods. We saw this dramatically last summer. Alternatively when oil prices fall people can more readily afford motor fuels and are thereby incentivized to drive more. At this time the import tax would come into play and help create a floor for the price of oil and restrain consumption.
Such a plan would also create stability for oil and gas industry. Now I know for many listeners this is one of the most hated industries in captivity, but it probably really shouldn?t be. Over the years when oil prices have fallen thousands and thousands of low producing wells, one to ten barrels per day, have become uneconomic and therefore were plugged. Such low productivity areas cannot be re-drilled economically and as a result that production is lost forever. The effect of creating a floor for domestic oil prices would help to maintain many of those wells in production and over the years keep millions of US dollars at home rather than send them abroad. Additionally this would help improve the balance of payments deficit.
Finally the oil and natural gas industry is mostly made up of hard working Americans who go to work every day and want to provide for themselves and their families just like anyone else. A level of price stability in this industry, critical to so many facets of our lives including our security, would also help maintain many thousands of jobs based here in the United States.
Well Tommy and Raymie, this is not a very funny letter however, I hope you can see the benefits of a graduated oil import tax instead of a gasoline tax and I hope you will modify your position.
I agree that a gas tax is the answer. But strict guidelines should be imposed in the tax law which does not allow for future revision of the rules for collecting and redistributing the tax other than for the Highway infrastructure. The new tax law should be worded that prohibit that future changes to the tax law are NOT to be allowed by future vote or Presidential order. Of course this type of tax arrangment would need to have an end date, like any legal contract, perhaps 12 years in the future.
The tax should be floating, depending on the average price of a barrel of oil which was maintained the past two weeks. If the average price of a barrel of oil was over $80 the past two weeks an immediate $.25 reduction per gallon in the tax should be imposed across the country. We would still be collecting revenues but not overly burdening the taxpayer. If the average price of a barrel of oil was over $110 the most recent two weeks the tax should be abolished all together until the price of oil drops to an average under that mark. The revenues should not be distributed for highway projects until the money is in the tax fund! The funds should be maintained for each state in relation to how much revenue the states brought in for fuel sales to date.
I argue that this type of arrangment could work, if it is administered correctly and left alone to fund infrastructure without overly burdening families and transportation companies with fuel costs. Admistration costs may not seem as high as thought as we are currently collecting a large portion of this information already. This is a ‘pay as you go’ policy, with relief breaks in time of economic swings.
I believe that the use of a gas/fuel tax as a way of funding highway construction and maintenance is no longer going to be a viable funding source in the not-too-distant future and that an alterntive, “use based” tax system should replace it.
Here is my point: as automobiles become more fuel efficient and/or stop burning dino-fuel there will be less and less fuel tax revenue and yet the same amount of vehicles on the road. Also, think of those vehicles such as electrics or bio-diesels that fill up at the local chicken joint (there are not many now, but what about 10 years from now?)? They are using the same roads as the rest of us yet they are not paying any highway taxes (literally getting a free-ride). OTOH, the guy who who fills-up his pleasure boat’s/ATV’s/Lawnmower’s tank with gas/diesel is paying highway use taxes with every gallon yet is not using a highway.
My proposed solution is this: Keep the present fuel tax, even increase it somewhat. Call it a “carbon” tax though but still use the proceeds for highway maintenance. At the same time, the federal and/or state governments should begin to impose a mileage/usage-based tax. Let’s say 2 cents per mile to start. You would enforce/collect the tax from the vehicle owner each year when they have their vehicle inspected or registered. The guy with the electric car who puts 10K miles on it a year would pay a $200 usage fee/tax at the shop when he gets it inspected (you could easily track vehicle mileage by tying them to the VIN and comparing odometer readings each year and having them stored at the DMV or some other agency). The shop would collect it and remit it to the DMV/DOT (they already do this with sales taxes).
For new vehicles, you would charge the tax up-front at the dealership or tag agency, say a flat $200 which acts as a credit. When they get the car inspected a year later, if they drove more than 10K miles they would owe the difference. If the drove less, they would have some credits to carry-over to the next year.
As fuel/carbon tax revenues go down (due to more efficient or alternative fuel cars being put on the road) you would increase the cents-per-mile rate to compensate.
I just think that this country needs to think about having those who use the roads more pay more in highway taxes, and a mileage based system seems to have some possibility of achieving that.
I personally don’t mind taxes and your gas tax is not unreasonable. However, I don’t have any faith in congress and their ability to execute. Congress is an v-8 running on 1 cylinder. Until congress proves they can say what they will do and actually do it - NO TAXES. Heck NO SALARY! They just spent $350 BILLION of our money and can’t tell us where it went and what effect it has had. NO!
You have got to be kidding! Trust the government with MORE of our money? Sure. They’ve done such a marvelous job with what we’ve given them so far! I never thought I’d see this day in the USA. The US government now OWNS large portions of banks, insurance companies etc. Welcome to socialist America. Now you want to turn another major problem over to those boneheads. Good plan.
I think the idea is excellent, and long overdue. We’d be in a far better place now had this tax been enacted after the gas crisis of the 70’s. We’d have more fuel efficient cars and much improved highways, as well as a useful public transportation system.
The gasoline taxes (including the existing ones) would have to be spent only on highway infrastructure, mass transit projects, and research & development for fuel efficient vehicles of all types. The funds must be spent in states in proportion to the amount of gas tax collected there.
This summer has proven once and for all that people will adjust their driving choices and habits when fuel costs more. A higher gas tax can encourage this type of behavior and put the funds to good use here in the USA, rather than to reap huge profits for big oil and fill the bank vaults of foreign countries.
I’m in full support of Ray’s gas tax rant. However, I expect it is politically impossible since people in this country seem to want all the benefits of a fabulous infrastructure but don’t want to pay for it and would crucify any politician who suggested it. I agree that government doesn’t always perform perfectly when it comes to tax dollars, but that doesn’t mean we should stop trying to improve our lives. Imagine how much money our country would have if we weren’t wasting it trying to get oil from the middle east!?! I have concerns for those with less money and think that it would be ideal if people with less money could “take mass transit or live closer to their work”, but those are the very people least able to find affordable housing, afford to move with job changes or have the power to influence decisions about mass transit routes. Here in the Seattle area, we have terrible mass transit and very little affordable housing.
Anyone who thinks this is a new idea has THEIR headlights up somewhere. I suppose I should have expected so many reaponses agreeing with this plan since the show is on NPR.
I love the show, and listen to it from a place that has a gas tax Americans could not even begin to believe, let alone accept. I live in Portugal, where the fuel taxes are among the highest in the world; even higher than the other European countries. The results: without subsidies from the EU, this country would not even be able to function.
I’m not blaming all our ills on the Portuguese gas tax, but, anyone who lives close enough to the Spanish border buys there fuel there, where the price is considerably less. Spain, for all of its socialism, has lower taxes all around than Portugal, and thereforre lower costs and greater growth.
I wish Ray, and all of you who are drooling all over his desire to pay more taxes, could spend a year or so living here and see what the REAL results of high taxes can do over the long haul.
Ray, why only 50 cents? If 50 cents is good, wouldn’t 5 dollars be better? Where does it, where should it, where can it stop?
Do you hav eany idea how much we already pay in taxes that are supposed to pay for reasonable infrastructure items? I expect you would be surprised if you found out.
NO My son and his family don’t even afford a phone. I’m on SS after my company went to Mexico. Do you really think a tax increase will help us? I have problems getting gas to take my wife to the treatments she needs 70 miles away. I guess people like you don’t think about regular people. No way we could afford new cars and I would think a lot of people are in the same condition.
If the high speed rail reaches Ware, MA I’m for it. Now if I want to take the train to Boston I have to grab a shuttle to Belchertown, grab a bus to Amherst, take the train to Albany, go to New York City, and get the accella to Boston. That’s what public transit is in the suburbs. If we give the theives in Washington billions of dollars they will probably just bail out the ailing drug industry, or those poor insurance companies, and we still won’t have any better roads or transportation. So NO TO NEW OR ANY TAXES!!!
Great ideas as long as Congress Must use the money for those purposes. While we’re at it, let’s add a surcharge on all mega-gas guzzlers called the “HummerHalt” Tax.
"Lastly, I acknowledge gas taxes negatively impact those who can least afford taxes and the federal government would need to provide a tax credit to low income people for gas taxes they paid during the year or a standard deduction based on income."
A three-hundred dollar refund in April doesn’t make up for the fact that Dad had had to skimp on his medication on a weekly basis to pay for the gas in his tank.
I agree. I would take it another step and make the tax variable to set the retail cost of gas at $3.50/gal. That way we would be able to sustain R&D into alternatives to middle eastern oil.
I’m with you and Ray. However, the government is also complicit by giving tax breaks for buying SUVs and for keeping gas prices so much lower than they are in the rest of the world.
I agree completely. One of the purposes of a tax system is to steer the economy where we want it to go. People make individual decisions based on money all the time. The reason The European and Asian car companies have so much experience in making smaller cars is not because they are enlightened. It’s because the taxes on fuel that are very high in those countries have made those customers want smaller cars for decades. The Big 3 don’t make gas guzzlers because they don’t better; they make them because we buy them. And we buy them because gas costs so little. I’d start at 50 cents and gradually ramp up even higher so that the actual price, in 2008 dollars, would hit about $3.50. If that doesn’t change our appetite then we need to go higher. Or other incentives need to be used to make the individual’s choice to buy smaller and drive less a smart choice. If milk were $10 a gallon no one would drink any. If it were $2 we’d be drinking it until the cows come. Oops… seems obvious. I hope Obama uses his position to help educate people and that he and other law makers have the balls to do it.