OPINION & EDITORIAL
Gas tax hike would keep America’s engine running
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Also by Ryan Greenfield:
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- Vouchers don't solve MPS woes, but incentives can (October 31, 2007)
- Gas tax hike would keep America's engine running (October 17, 2007)
- Holistic admissions necessary for minority progress (October 3, 2007)
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by Ryan Greenfield
Wednesday, October 17, 2007
We Americans sure love our cars.
And why shouldn't we? Sure, the price of gas may be near its record nationwide, $2.76 per gallon on average this week, but it's startlingly cheap compared to most countries in Western Europe. The most recent prices per gallon of gasoline are $6.48 in Holland and $5.97 in Italy. Gasoline prices are probably on the upswing, considering that the price of crude oil — the main component in gasoline — hit $87.61 per barrel yesterday.
But we're used to gasoline being pretty cheap over the long-term. I can easily remember a time when $1.50 per gallon sounded pricy. Thus, American society is structured around the assumption of gasoline's ongoing cheapness. It's not unusual for many suburbanites to commute an hour or more to work and back with much of it stuck in traffic. Carpooling is exceedingly rare, and the percentage of those driving alone to work has been increasing since 2000. Soccer moms frequently drive large SUVs or Hummers that get gas mileage in the low teens, even though I doubt they get the chance to do much off-roading in their free time.
It is not a stretch to assert that the price of gasoline in the United States does not take into account the negative externalities caused by our excessive oil consumption. The government obviously has a compelling interest in the regulation of a heavily polluting nonrenewable resource that we import largely from the most unstable region on Earth, the Middle East. The best way the government can reduce our gasoline usage is through some tough love: by raising the federal gasoline tax from its current 18.4 cents to a dollar or more per gallon.
Setting aside the political difficulty of raising taxes on something as sacred to Americans as their ability to drive, an increased gasoline tax has the potential to kill a large number of birds with one stone. In addition to conserving fuel, it is likely to reduce traffic, incentivize smaller, more fuel-efficient cars, reduce greenhouse gas emissions and other pollutants, reduce suburban sprawl and decrease our reliance on foreign energy sources.
As any economist will tell you, incentives are important. Whenever something gets more expensive, you buy less of it. Gasoline consumption has been shown to be relatively inelastic in the United States, or in other words, price increases cause relatively small decreases in demand. This is due to very rational behavior. If you bought a gas-guzzler when gas was a $1 per gallon, it's very expensive to just junk your old car and go out and buy a Toyota Prius Hybrid as soon as prices get up to $3. And even for those who can afford it, many expect the prices to go back down at some point because it's happened before. The Middle East calms down, summer driving season ends, and a vehicle exchange may turn out not to have been worth it.
A larger federal gasoline tax would eliminate this problem. As soon as Americans realize that gas prices are never going to go below $3 per gallon again, paying that extra money for the fuel-efficient car is assured to be worthwhile. Global warming is a huge and growing problem that the United States will have to face now or down the road. Of course, the longer the government waits to enact policies to reduce carbon and other emissions, the more drastic the policy choices will have to be. Transportation accounts for about a quarter of energy use in the United States and is mostly reliant on polluting fossil fuels like petroleum. A gasoline tax is a much more effective way to reduce greenhouse gas emissions than the development of clean-burning fuels like ethanol. This is because of the vast energy inputs associated with the production of ethanol, especially the corn-based ethanol predominant in the Midwest.
Critics of higher gasoline taxes will note that it disproportionately impacts the poor. My solution would be to use part of the gasoline tax revenues to replace the income of the poor with low-income tax credits. It's also important that the tax increase be phased in over time, perhaps by just a few cents every month, so people have time to prepare for it, and it doesn't have adverse economic consequences. The rest of the tax revenue should ideally be used to subsidize practical renewable energies and energy-efficient technologies to further reduce our dependence on foreign oil.
The United States has always been a fiercely independent, pioneering nation. But the American Dream, consisting of a large house in the suburbs sitting on nearly an acre of land and a garage full of gas-guzzling SUVs is no longer sustainable. Those who impose clear costs on society should have to pay for the privilege because after all, we all pay indirectly.
Ryan Greenfield (rgreenfield@wisc.edu) is a junior majoring in political science and economics.
Anonymous (October 17, 2007 @ 6:56am):
Are you a total idiot. Many working class people like myself have no choice but to drive a car to work daily. If you increase the gas tax all you do is give the government more money to waste (and you can bet the increased spending won't be on infrastructure).
Wake up to the fact that we are NOT Europeans with a great rail system.
Your solution won't work.
Anonymous (October 17, 2007 @ 7:14am):
A bigger story is that Wisconsin's law requiring gas stations to mark up gasoline by as much as nine percent (or about $.25 per gallon) was declared unconstitutional yesterday. That is good news for consumers and could make a gas tax increase more palatable.
Anonymous (October 17, 2007 @ 7:35am):
OK, you buy into what the media tells you, so I'll give you the real truth.
The price of gasoline has not changed.
The value of the dollar is now so weak that it buys only half of what it used to.
I believe the weak dollar policy of the Bush administration was to 1) reduce the trade deficit with China 2) increase our exports and 3) cause the value of our national debt to decrease proportionally to the value of our currency (effectively, when the dollar drops, our debt to foreign countries is worth less).
Personally, I don't think we've gained anything from the weak dollar.
Anonymous (October 17, 2007 @ 5:21pm):
It is funny to me that the same people how "say" they want to help the poor come up with so many ideas to hurt them. A $0.50 will only make it harder for the the poor to get to work, and buy food and other things, as the tax will cause prices to go up.
Anonymous (October 17, 2007 @ 5:28pm):
Thank you, Ryan Greenfield, for writing this article. I wish other people thought about their impact on society & the environment more often.
Anonymous (October 17, 2007 @ 6:04pm):
If the revenue raised by the gas tax is put into infrastructure for public transportation, the options availible to the poor will actually increase. If you think about it, the very poor cannot afford to own a car and depend instead on public transportation, like bus systems. But since our priority is usually to keep Americans happily driving along with cheap gas prices, public transportation systems don't reach nearly as many people as they could and cost more than they would if more people had the incentive to use them. A gas tax wouldn't hurt the poor disproportionatly and could actually provide many benefits.
Nathan Braun (October 17, 2007 @ 6:50pm):
The only thing I'd disagree with is this:
"The rest of the tax revenue should ideally be used to subsidize practical renewable energies and energy-efficient technologies to further reduce our dependence on foreign oil."
The rest of the tax revenue should be used wherever it's most needed--whether that's in health care, education or somewhere else.
If the tax is set at the right amount it will take into account all of the externalities, including those associated with foreign oil, and reduce consumption to the optimal amount.
It will also make alternatives more attractive--we won't necessarily have to spend the revenue on subsidizing them.
Anonymous (October 17, 2007 @ 9:01pm):
If your job pays so little to not be able to pay for your real transportation costs to work, then get another low paying job near where you live, or move closer to where you have to be 5 days per week. Cheap gas was a temporary thing of the late 20th century, nobody owes you subsidized driving. In this country you enjoy the lifestyle you can pay for. Its interesting to read people that just think somehow they're owed a certain lifestyle, especially when its unsustainable.
Good comments about the devaluation of the dollar, yup makes the apparent prices of commodities go up.
I'm not for an arbitrary $1 tax, but a full up pay-as-you-go year to year, no bonds for roads, just gas tax. No registration fees, just gas tax. The road costs (policing, building, maintaining) of the previous year set the next year's PERCENTAGE tax on a gallon of gas.
I guess the alternative is we can have more bridges collapse.
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