The Frontal Cortex

Of course the right wants higher gas taxes, the money could then be transferred to their buddies.

We should start by ending oil company subsidies, then see if we still need a gas tax.

Posted by: Spike | October 20, 2006 11:52 AM

Yeah, this is just not realistic. Prices have already risen in taxes by over a dollar over the last decade without any help from taxes whatsoever, and they haven't had anything like the effects that "the policy wonks" are claiming here that another measly dollar in tax rise will have. Gas got all the way up in the $3.50 range this year in some places, and what was the effect? Well, Americans are now slightly more likely to buy cars with better fuel-efficiency ratings. Oh, and Ford is absolutely screwed and laying people off all over the place because they bet on consumers continuing to buy SUVs. How much progress is this? And would we really get anywhere by spending the next ten years slowly raising gas prices by the same amount that this year they rose in a matter of months (and then dropped back from over a few months more)?

The American gas consumer *depends on* gas. When the prices go up, we don't use less of it, we just pay more for it and suffer. To the extent people use less gas when prices go up, it isn't because their dependence is being lessened or because alternatives are being explored; it's because they elect not to go certain places they don't need to due to higher cost of transportation, for example not going on vacations. Avoiding a vacation doesn't lessen our need to go fight pointless wars to ensure an oil supply, but it might have negative effects on the economy.

The problem is America is dependent on oil, and these dependencies are too deep-seated to magically lessen just because the oil is harder to get. We're dependent not by choice, we're dependent because that is the box the infrastructure of our nation has put us into-- because American cities are designed such that cars are needed to navigate them, because no realistic alternatives to gas-based transportation exist except in the two or three major cities with working public transit. If there WERE alternatives-- say, if America were laid out or equipped for public transportation in a way I doubt it will ever be, or if hydrogen cars were actually viable in the market yet-- then rising gas prices would directly put economic pressure for people to switch to those alternatives. But in the absence of any path to escape from the oil burden, turning up the pressure to take that path that doesn't exist seems just sadistic.

This said, it's no surprise WSJ-school Republicans and economists would endorse something like this, and the reason why is buried in the article: dropping income taxes and picking up the slack with gas taxes get you one step closer to consumption taxes, which is an old fiscal-conservative wet dream from back in the days when they were still politically relevant within the Republican party. The great (or terrible, depending on your perspective) thing about consumption taxes-- or at least ones that tack to basic goods like this gas tax does-- is they are inherently not "progressive" in quite the sense that our current income tax is. You pay the exact same amount in taxes for ten gallons of gas regardless of your capacity to afford those taxes. If some part of your taxes are suddenly paid at the gas pump instead of on your income, that dastardly tax burden is shifted just a little bit more from the rich to "everybody else".

But of course then there's the other thing, which is that gas isn't just something average consumers use in cars. It's something that's inserted into practically every part of our economy at every level, from transport of items to plastics. Which has the interesting effect that a consumption tax via gas taxes would be something less of a sales tax, and something more like a European-style VAT, hitting the economy at multiple different levels. My intuition at least is that this could under some circumstances actually have some of the reducing-gas-use effects the WSJ article was looking for, because producers and shippers have a lot more leeway than the average guy driving to and from work every day to find alternatives to oil (say using other than trucking, or changing to use suppliers that are closer) when pressure to do so is applied. But I really don't think this was what in the mind of the WSJ writer who made this piece-- he's an economist, so he's obviously aware of this aspect of gas consumption, but if it occurred to him when writing this he doesn't give us any external signs of it, considering the entire thing talks in terms of cars, people driving their cars and consumption tax. (Including that one weird segment where he daydreams about "his fellow drivers" driving less, thus creating less congestion on the road when he drives to work. Apparently, unlike the other drivers, he does not plan to spend less time driving to work in the new gas tax regime.)

Posted by: Coin | October 20, 2006 4:09 PM