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Is a Higher Gasoline Tax Good Or Bad For America?

hpmctorquehpmctorque Posts: 4,119
A tax increase has been a political third rail in the U.S. Therefore, the idea of increasing the gasoline tax, as a way to reduce our nation's dependence on foreign oil, has gained little traction thus far. This results in a conundrum. Why? Low fuel prices encourage the sales of vehicles with low fuel economy, while undermining the effort to introduce fuel efficient vehicles and alter wasteful habits.

I dislike higher taxes as much as you do, but I believe that increasing the gasoline tax is a necessary component of achieving the Obama Administration's goal of becoming less dependent on foreign oil and, at least in some cases, governments that don't like us. Incidentally, you don't have to be an Obama supporter to be in favor of becoming more energy independent, since this goal enjoys a lot of Republican support too. I happen to be an independent who, at various times, has voted for candidates of both major parties.

I believe that CAFE has generally been a failure, and that most other proposals for reducing fuel consumption, such as the Clunker Plan, have serious inherent flaws. Although a gradual increase in the gasoline tax is not politically popular, it would be the most efficient and effective way to alter consumer behavior, in my opinion.

Michael Jackson - not the singer, but the CEO of Autonation, the largest of the megadealers - strongly favors a gasoline tax increase, and recently suggested raising the tax by 10 cents per gallon for the next 10 years. I don't know if 10 cents is the right number, but I buy into the idea of applying the increases gradually, to give people a chance to factor higher fuel costs into their driving habits and car purchasing decisions.

The argument that higher taxes are bad, or that raising taxes during a recession is bad policy, could be dealt with by making the gasoline tax revunue neutral. This could be achieved by reducing other taxes by a similar amount.
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Comments

  • gagricegagrice San DiegoPosts: 28,679
    would you favor reducing or repealing the current gasoline tax? Why or why not?

    I am not thrilled with the Federal Tax on gas. I have gotten used to it. Though I do not believe it is all used as it was purported to be used. If it is a tax to maintain the infrastructure that is fine. If it gets used for any other purpose I am against it. The issue for me is the huge state tax in some places. CA being the worst. And what are we getting for that tax? Last I checked CA tops the list of the 50 states at about 64 cents per gallon. It changes as there is sales tax of 7.75% added on top of the other taxes. I would be surprised looking at all the potholes in the roads around here, if even half goes for the intended purpose. Next to Illinois and NY I would imagine we have the most shysters in our legislature and administration. They have stolen every source of revenue to support their pet projects and social programs. They even ripped off the schools by not using the lottery money as it was intended. So for me to say I would agree that one penny more tax on anything in this state was good, is not going to happen. Where is that rope. Hang em all from the Golden Gate Bridge would be my remedy for this states government thieves.
  • kernickkernick Posts: 4,072
    Though I know you have good intentions with this gas tax idea as written; and it would be the best way to implement it, I think you just have to review other forums which have pointed out all the problems with this idea.

    The Main problem with your idea is that people will not react necessarily the way you want to this tax increase. What do I mean? I think you assume the only result is that people gradually move to more efficient cars, or to electric cars and such?

    But the actual results of a gradual tax increase results in these varied results (and I'm sure I won't get them all).

    1) It is the wealthier people in society who buy the largest, most powerful, and least fuel-efficient vehicles in many cases. The gas taxes you propose would have no effect on these sales.
    2) After people cut a little of their consumption, they reach the point where they can not cut more driving, and then they cut other stuff instead, which hurts the economy.
    3) If you propose cutting foreign energy, then I say the proposer needs to propose where an equivalent amount of domestic energy will come from.
    4) The population of this country is growing and we need more energy every day. That makes it doubly hard to cut foreign energy sources.
    5) No other fuel or energy source has proven as convenient (available, time to refuel) and offers the range of gasoline. A fuel also has to be available even when natural disasters shutdown an area's power-grid.
    6) I just started doing my taxes, and thank god for Turbo Tax for importing stock gains from my broker. Taxes are already too complicated, without making further deductions and exemptions. The tax code should be 10 pages long, and a maximum of 2 pages to fill out. Sorry for all those people who make billions of $ selling software, and doing peoples' taxes.
    7) The gas tax is supposed to be used for roads and bridges only, If it becomes so much larger, what would be done with the money? Given to banks so they can buy $1,400 garbage cans and (2) chairs for $87,000 - Merrill Lynch CEO (2008)?

    Anyway you get the idea. I'm for everyone keeping their money and not giving it to DC to build a bureaucracy around, and waste the $.
    I'd rather have a freer society that makes individual blunders, then have a government that we feed, to herd and protect us like sheep. The U.S. government was NOT created in the 18th century to alter (coerce) consumer choices.
  • oldfarmer50oldfarmer50 Posts: 6,017
    BAD! BAD! BAD! BAD! :mad: :cry: :mad: :cry: :sick: OK, I think you get my point.

    2009 PT Cruiser, 2008 Eclipse, 1995 Mark VIII, 1988 GMC Van

  • hpmctorquehpmctorque Posts: 4,119
    You make some excellent points, but I don't entirely agree with your conclusions.

    I'll respond to your points in the order you presented them, as follows:

    1) True, but what you leave out is the fact that the vast number of people are not wealthy or even well off, so the fact that the behavior of the wealthy may not be affected by a gasoline tax has less impact on total usage than you imply.

    2) I don't really understand your logic here of "...and then they cut other stuff instead, which hurts the economy", especially if the incremental gasoline tax were to be revenue neutral.

    3) The higher gasoline tax would reduce energy consumption, and that reduction could come entirely from our purchases of foreign oil. Domestic production would be unaltered; that is, it would be neither more nor less than what it would have been without the gasoline tax increase.

    4) True, unlike most western countries, our population is increasing. Whatever our energy needs are, given our population, we'll use less if prices are higher. That can translate into less demand for foreign oil than would be the case without the tax increase. In the short term people will adjust their driving habits. In the longer term, people will make changes in vehicle choices and how far they choose to live from work.

    5) I agree. Consumers will continue to decide whether, and/or to what extent they want to substitute the convenience and other advantages of hydrocarbons with other types of power, as they do in Europe, for example.

    6) I agree with you 110%. I favor simplification of the tax code. To your point, though, how would raising the federal tax on gasoline make doing your tax return more complicated? You would just pay more at the pump than you do now.

    7) The total amount of our gross domestic product that's taxed would remain the same if the gasoline tax were offset by tax reductions elsewhere (made revenue neutral). Look, I'm as horrified and concerned by the huge budget deficit, the national debt and wasteful spending as other concerned citizens are. We're in total agreement on the need to cut waste and pork. Beyond that, whether it would be preferable to reduce government spending or raise taxes to balance the budget, or some combination of these two, is subject for another discussion. There's no need to get into that here.

    "I'm for everyone keeping their money and not giving it to DC to build a bureaucracy around, and waste the $.
    I'd rather have a freer society that makes individual blunders, then have a government that we feed, to herd and protect us like sheep. The U.S. government was NOT created in the 18th century to alter (coerce) consumer choices."

    You won't get any argument from me on these points.
  • nippononlynippononly SF Bay AreaPosts: 12,669
    an increase in the gas tax, incremental over, say, 10 years, but only if it is revenue neutral. We've got refineries claiming they have to stop refining gasoline because they can't make a profit. In a time of the lowest oil prices in a decade our gas has been going UP in price for more than a month.

    The old gasoline supply chain has many broken links, folks. Time to ease future pain for ALL of us by levying a tax and getting us off the stuff.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • kernickkernick Posts: 4,072
    1) If you look at who the 10M people are who are buying new vehicles this year, you will find that most people are in the upper 30 -40% of the income group. People making $40K/year are not your typical new car buyer. The typical new car buyer is going to probably have an income of $70K if single or a combined family income over $100K. These people are not going to be overly concerned if gas is $2.00 this year $2.10 next year and $2.20 ..., such that it means they're going to buy a Fiesta instead of an Altima or Highlander.

    2) What I meant was you assume that people will cut back on gas consumption with every increase; I think you may find many keep using the same amount of gas and start cutting back on going to restaurants instead.

    3) I don't want to see people forced to cut back on energy consumption. Energy provides a better lifestyle. If you want to cutback on foreign energy, I want an increase in domestic energy.

    4) Same as 3). I want the same or more energy per person.

    6) You were talking about offsetting the tax increases, and the usual proposals are for people to fill out forms to get rebates. I'd assume you'd need to keep records of what gas you bought, and keep track of what miles (commuting, but not recreational driving) you drove and what would be deductible, and this would be another section to fill out.
  • kernickkernick Posts: 4,072
    an increase in the gas tax, incremental over, say, 10 years, but only if it is revenue neutral.

    You might see how that could easily be done as a whole, but when you go to apply that all hell breaks lose on trying to get that neutral on the individual level.

    For instance drop the sales tax on other items 1/2% to compensate, and what happens. The rural minimum wage worker driving 40 miles each way to work, who doesn't have the money to buy much is hit hard, while a guy living in NYC working on Wall Street taking the train, says "I love this new program". You run into the same inequities when you start trying to reduce property or income taxes to compensate. You get a big mess arguing over what's fair. Taking extra tax from 200+M drivers and then trying to get them back their share in some other tax is next to impossible.
  • hpmctorquehpmctorque Posts: 4,119
    Using your arguments, no changes in the tax code would ever be made, because there would be winners and losers. Further, some winners would win more than other winners while some losers would lose more than other losers. That's life, and the way it almost always is when changes are made. That would be true even if you eliminated the gasoline tax, would it not?

    I think simplicity is a virtue regarding taxes, and I assume, from your comments, that you would agree with that. Therefore, I would make the gasoline tax increase revenue neutral on an overall basis, and accept the consequence that some would benefit from this change while others wouldn't. That happens with virtually all tax changes. Overall, however, the country would be better off, in my opinion, than if we continue along the current path.

    I'd prefer to let those with more experience and facts than I have decide the size of the incremental increases, and whether they should continue, for 10 years, or 8 or 11. The purpose of this discussion, at least at this point, isn't to get bogged down on these details.
  • gagricegagrice San DiegoPosts: 28,679
    I would make the gasoline tax increase revenue neutral on an overall basis

    You have mentioned revenue neutral in every post. Just what tax do you plan to cut to neutralize this new gas tax? You have to remember that about half the citizens do not pay much if any income tax. So the guy on minimum wage driving grandmas old 88 Buick to work will be hit the hardest with the least chance to survive this gas tax.

    I find it a big mistake to even think about.
  • hpmctorquehpmctorque Posts: 4,119
    "Just what tax do you plan to cut to neutralize this new gas tax?"

    Some issues require difficult choices, because there are negative consequences regardless of what you do or don't do. Doing nothing is a choice. I think our overdependence on foreign oil from unstable parts of the world is one of those issues. In my opinion, it would be best for our country to reduce its dependence on foreign oil, for economic and foreign policy reasons. Since our ability to increase domestic production at competitive prices on a sustained basis appears to be limited, the question is which method for achieving this goal would work best.

    As I've stated, I don't like tax increases, but I think doing nothing, and continuing our wasteful ways, will result in worse consequences than raising the tax on gasoline.

    As to which tax or taxes I would increase, to offset the gasoline tax, I'd probably choose the income tax. The "the guy on minimum wage driving grandmas old 88 Buick to work" that you mentioned would get a tax (cash) rebate. Another approach would be a reduction in state sales taxes. Since the federal government would receive the incremental revenue from the gasoline tax increase, it could then refund the increase to the states.
    Let me hasten to add that I'm not a tax expert, so I expect that people who are more knowledgeable on tax matters than I am might have better ideas concerning the best mechanism for achieving revenue neutrality. Maybe other discussion participants know of a better approach for offsetting the tax increase.
  • gagricegagrice San DiegoPosts: 28,679
    As Kernick has pointed out we do not have any viable alternatives at this time to oil. We have cut consumption by quite a lot during and since the oil price bubble. If the EPA, Feds or any other government agency was really interested in cutting oil consumption they would have pushed for more diesel vehicles. They have done just the opposite. They are all in the pockets of the oil companies. When we run out of oil or when supplies start to actually get tight the price will go up and stay up. There are companies and people working on alternatives. The prize for coming up with alternatives that are practical are enormous. So it is a good field to be in. I still believe algae based biodiesel is the most viable at this time. More taxes just does not make any sense to me. Especially as a deterrent.
  • kernickkernick Posts: 4,072
    I think our overdependence on foreign oil from unstable parts of the world is one of those issues.

    China and India are 2 countries that have a desire for more and more oil. They have plenty of manpower to raise security forces. The U.S. has the latest technology. I suggest an alliance, where if the people can't behave, we send the forces to make them peaceful. I had always suggested that the problem in Iraq was that every Iraqi male should have an escort for a while; anyone found out without an escort would be shot. The U.S. did not have the manpower there to prevent these bums from forming militias. If Iraq had to be emptied, and a Chinese soldier stationed every 25 yards along the entire border so be it. ;)

    As I've stated, I don't like tax increases, but I think doing nothing, and continuing our wasteful ways, will result in worse consequences than raising the tax on gasoline.

    When gas hit $4.00+ this summer, consumption went down what 5%? With the known amount of oil and some reasonable increases to be found, this change in consumption based on the tax increases you propose is minimal. Maybe 50 years of oil becomes 55 years. Since the future is much longer :) than you can say it really makes no difference.

    Plus you miss the fact that reducing gasoline consumption here in the U.S. by 5% simply puts less demand on oil, lowers the price, and the global market thus buys slightly more.

    Look before this topic gets all fired up, there is no putting the genie back in the bottle. Once it became known that oil could be burned and was so useful, the course is set to drill and use it all. The only thing that stops that is to discover a new source of energy. People of the globe will continue to use any and all fossil fuels for their comfort and enjoyment until they are exhausted (except the renewable wood). The only solutions are better solar, wind, and tidal systems, some sort of deep geothermal tapping, or fusion.

    Your proposal to give a rebate to the lower income is just the sort of additions to the tax code we dislike. Why not raise the minimum wage to compensate for the additional tax they pay?
  • nippononlynippononly SF Bay AreaPosts: 12,669
    When gas hit $4.00+ this summer, consumption went down what 5%? With the known amount of oil and some reasonable increases to be found, this change in consumption based on the tax increases you propose is minimal.

    What a gas tax is designed to do is change peoples' car-buying choices, more than change their daily driving habits. Gas is up today, it could be down next week, is what many will think during price spikes like the one last summer. OTOH, if the government imposes a gas tax, people know gas is going up and staying UP, and the next time they are car-shopping they will be thinking "I need a vehicle that is 20% more fuel-efficient than my last one, because gas is up 20% or more for GOOD".

    And BTW, while I am all in favor of it being revenue-neutral, I don't think it should just be one gigantic federal give-back to the states - the gas tax hasn't kept pace with inflation for more than 20 years. An immediate increase of some sort is needed just to keep pace with the costs of road maintenance and repair. The 40-year life expectancy of the concrete surfaces of all those interstates built in the 50s and 60s has already reached or is just reaching its end. That's a lot of repaving that's needed, folks, and it won't be free.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • gagricegagrice San DiegoPosts: 28,679
    That's a lot of repaving that's needed, folks, and it won't be free.

    Not to worry. Obama has an extra $$Trillion set aside to fix all the roads and bridges. We can eliminate the gas tax completely... :blush:
  • kernickkernick Posts: 4,072
    people know gas is going up and staying UP, and the next time they are car-shopping they will be thinking "I need a vehicle that is 20% more fuel-efficient than my last one, because gas is up 20% or more for GOOD".

    As I said before I don't think MOST new car shoppers care much if the gas-tax is going up $0.10/year. The average price of a new car is about $25K right? Maybe $20K right now after all discounts in this market. It is not the average person making $40K/year who is buying new cars. The people buying new cars are typically upper middle class and businesses. A person making $75,000+/year really isn't concerned if gas cost $1.00 or $2.00 or $5.00 more per week.

    It is the person who buys the used car making $40K/year who cares! But they do not make the decisions on what is bought initially, thus they do not control what type of vehicles are on the used market.

    Vehicle choice is mostly from the better-to-do who care less about these small gas tax increases!

    If you are concerned about small increases in gas costs, then certainly after all we've been thru with people getting loans they shouldn't take ... the system really shouldn't allow them to buy a new car.

    A new car is such an extravagence and waste of money, that if you can't pay cash for it, I would really question whether you should buy it.
  • Stever@EdmundsStever@Edmunds YooperlandPosts: 38,968
    A person making $75,000+/year really isn't concerned if gas cost $1.00 or $2.00 or $5.00 more per week.

    Heh, I think that might depend on how many boat, 4-wheeler, car and mortgage payments they have.

    If you want to discourage the burning of gasoline for transportation, raising the taxes would be an efficient way of doing it. And the bump in tax revenues until people really quit driving or switched fuels would pay for a lot of bridge and road repair.
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,305
    Does anybody out there have any memory of the reason given for the establishment of the DEPARTMENT OF ENERGY during the Carter Administration? Anybody? Anything? No?

    Didn't think so.
    Bottom line . . we've spent several hundred billion dollars in support of an agency the reason for which not one person who reads this can remember.
    Ready? It was very simple, and at the time everybody thought it very appropriate.

    The Department of Energy was instituted 8-04-1977 TO LESSEN OUR DEPENDENCE ON FOREIGN OIL. HEY, PRETTY EFFICIENT, HUH?

    AND NOW IT'S 2008, 31 YEARS LATER, AND THE BUDGET FOR THIS NECESSARY DEPARTMENT IS AT $24.2 BILLION A YEAR, THEY HAVE 16,000 FEDERAL EMPLOYEES, AND APPROXIMATELY 100,000 CONTRACT EMPLOYEES AND LOOK AT THE JOB THEY HAVE DONE!

    THIS IS WHERE YOU SLAP YOUR FOREHEAD AND SAY 'WHAT WAS I THINKING?'

    Ah yes, good ole beauocracy. And now we are going to turn the Banking system over to the congress? God Help us.
  • Stever@EdmundsStever@Edmunds YooperlandPosts: 38,968
    I had a lot of house weatherization stuff done when I lived in Alaska. Over 15 years in the same house, my gas and electric bill went down. My bud up in Seward is getting an energy audit next month. So DOE saved me some bucks.

    Actually with the credit I got up there with my furnace upgrade rebate, and the tax credit I got a couple of years ago with my more efficient water heater, I've saved thousands, thanks to those "bureaucrats."
  • nippononlynippononly SF Bay AreaPosts: 12,669
    It is the person who buys the used car making $40K/year who cares! But they do not make the decisions on what is bought initially, thus they do not control what type of vehicles are on the used market.

    Yes, but you know what they DO affect? Resale values. If small fuel-efficient cars retained way more of their value than trucks and SUVs, don't you think that's one important factor that would play out in peoples' minds when they select a new vehicle? Just look at how hard-hit the SUV resale values were last summer, and that was with gas at $4/gallon for less than 6 months.

    And BTW, there are plenty of middle-income people who WOULD care about a gas tax if it started at an increase of $0.50 - that would mean an additional $35/month in gas expense, and $420/year. That's enough to get people to add it to the list of things they consider when purchasing a new vehicle, especially if they know it will continue to increase slowly.

    Lastly, say what you will about what SHOULD be the case, but there are plenty of people in the $30-40K annual income bracket buying new cars, even now. I know two that have purchased within the last 3 months. For both, gas cost was a priority in the purchasing decision, one went with a Corolla and the other with a Mazda3 2.0.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • gagricegagrice San DiegoPosts: 28,679
    All my tax credits or rebates came from the state. I can't think of a thing the DOE has done for me. Seems like each time I wanted to use one of those tax credits something was not just right. I think the last one had to do with alternative minimum tax. Another flawed Democrat tax scam. I would fight against any additional tax as it is much easier for the government to implement than to do away with.
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