MR readers will know that I favor a gas tax, at least if it is made part of a broader fiscal bargain, including spending cuts, favorable treatment for savings, and redoing the AMT, among other reforms. But note: I don’t want to replicate our current fiscal problems at higher levels of government spending. Then we would be left with no wiggle room, if and when the likely demographic crunch comes. If we are not careful, that is what a gas tax could lead to, so take my endorsement of the idea with that qualifier.
The best time to put on a gas tax is right after a big market-induced spike in prices. That means now, or more realistically after the November elections.
Yes I know about tax smoothing, but that is not the central consideration. The key question is how to get broader fiscal reform, while taxing some negative-externality activities.
When it comes to high gas prices, people can only get so upset at once. Plus they will never quite understand who is to blame for what. Why are prices high? Was it the government? The evil oil cartel? al Qaeda? The Chinese? Such signal extraction problems are beyond most voters.
Waiting for gas prices to fall is the least likely way to get from where we are to where we ought to be. I await, but do not expect, The Grand Fiscal Bargain.
The high gas taxes in Europe seem to be a natural experiment. What good and bad have they done?
Talking to some friends that live in England … It has done little to curb their driving, in fact it has done little more than piss off a large portion of the populace and put a stranglehold on young workers who are working. Gas prices coupled with the high cost of insurance for anyone under 21 … well needless to say there are alot of pissed off young brits.
The Republicans control the White House, Congress, and the Supreme Court. If they can’t make spending cuts now, under what plausible scenario would they _ever_ make cuts?
I missed the earlier post on your gas tax, so if I bungle your point, sorry.
Oil is becoming a commodity whose price that, more and more, we cannot control. A gasoline tax does nothing for the supply side of the problem. Since gas is somewhat inelastic, a gas tax also does not really help with the demand side. That is unless it stays high for a long period of time and no alternatives are introduced. It does insure that the overall price of gas will be higher.
While combining a gas tax with other legislative efforts makes good practical political sense, for me, if the gas tax doesn’t make sense on its own, combining it with other items hoping that the sum is greater than its parts will lead to unanticipated consequences.
Noah: fair point. What I meant is that with increased demand from China and India and suppliers like Venezueal, Bolivia, Russia and some countries in the Middle East who are less friendly to the U.S., our ability to be independent has diminished. Our “control” of the situation is weaker, the price is what the price is.
Perhaps we should have started drilling ANWR a long time ago?
I think that we should be building refineries hand over fist and try to take advantage of oil shale in the American Midwest. The problem is that the environmental special interest groups go berserk if you so much as mention the idea of drilling … It’s unfortunant that people actually listen to what they say.
I think we should contract to drill Siberia for the Russians and get a cut of the crude that we draw out. It just seems lik e a fair trade, they get our expertise in cold weather drilling and a boost in GDP and we get crude…
What do you think would be a reasonable amount for a gas tax? Do you favor a flat fee or a percentage?
Regarding ANWR, the Dept. of Interior page at http://www.doi.gov/news/030312.htm estimates that ANWR could produce 10.4 billion barrels of oil at a rate of 1.4 million barrels per day. At that rate of production, ANWR would produce for about 7500 days, or just over 20 years.
That sounds like a lot, but as of 2005, US oil consumption was about 21 million barrels per day. So ANWR could supply about 6.5% of the US daily consumption of oil for 20 years. Put another way, all of ANWR’s estimated recoverable reserves constitute about 1 year and 4 months of US oil consumption. If we’d started drilling ANWR a long time ago, it’d be empty now. ANWR is basically a (large) drop in the bucket given our current situation.
Off-topic China factoids:
“China consumes 12 percent of global energy, 25 percent of aluminum, 28 percent of steel and 42 percent of cement — but is responsible for only 4.3 percent of total global economic output.”
Seems like China’s tax/subsidy policies for petroluem are going to matter a heck of a lot for world oil pricing and consumption tha whatever the US Congress does. It also suggests a staggeringly inefficient economy that should be choking on high oil prices….
The market isn’t going to allocate the refuse from the burning of your gas. You choose (and so do a lot of other people) to allocate it to my lungs (via the air, the property rights on which are unfortunately murky). Until you have to pay the full cost of doing that, you’re going to choose to consume more gasoline than you otherwise would. So will I. So will everybody.
For me, the question is not how to get broader fiscal reforms. Those are not coming. Ever. Nor is the question how to ‘starve the beast’. That isn’t gonna happen either. The question is merely whether a scarce resource will reflect something closer to the complete cost of consuming it.
China’s consumption might be investment, not inefficient consumption. Anyway.
It’s funny seeing people insist that taxes never go down when we live in the era of the Bush tax cuts, both of income taxes and the inheritance tax. And there were Reagan’s tax cuts in the 1980s, yes? You can’t praise someone for cutting taxes while saying taxes never go down.
And what were the results of those tax cuts? Massive gov’t debt, without much if any gov’t shrinkage. As Chris Rasch said, the Republicans are firmly in control — if the “beast” isn’t to be tamed now, then when?
As for gas tax, yeah, I think the strongest argument (economically, not necessarily politically) is to privatize the costs of CO2 (and other) pollution.
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