Federal Gas Tax Increase a Definite Possibility

We've seen the headlines declaring the 2009 deficit to exceed $1 trillion, and with the massive economic stimulus bill coming, we appear ready to add to it. Although Obama claims the bill will have no pork attached to it, but I'm a little skeptical. They will need to come up with new ways to increase government revenue, and here's one possible one:

With fuel prices low due to a economic slowdown and demand destruction, those is Washington might seize the opportunity to raise the federal gas tax...

A government commission has called for a 50 percent increase in gasoline and diesel fuel taxes, which could mean an extra 10 cents per gallon for drivers.

Congresswoman Corrine Brown told Channel 4 the government needs a comprehensive plan to solve the problem -- a plan that could include vehicle registration fees or toll roads and other local taxing options.

Brown said it's a combination that has worked overseas.

"There is no quick fix, but we don't have to reinvent the wheel, we can look at Europe, and it works, and we need to figure out how to do that here," Brown said.

Ah yes, the European model. It makes sense in theory to raise gas taxes so people only buy fuel who absolutely need it, and the rest can rely on public transportation. But it just doesn't work for a major part of America geographically.

If the tax increase went directly to alternative fuel research and production, it might be feasible, but it most likely to go "other areas."

Now is the time to sell this, and they know it. Oil is a resource with dwindling supply, and as soon as the major world economies stabilize, gas prices are going to rise. And selling an increase on the gas tax won't fly with $4/gallon gas. Remember this summer when there were calls for a federal gas tax holiday? What a difference six months makes.

Comments

[dick streich:]

I hope not. It's a dumb idea. In 2 - 3 years, gas prices will be back to where they were 6 months ago and the last thing we need is a tax that makes it more expensive

Jan 08 08:49 AM

[J Wills:]

I think its a great idea while prices are low. We all adjusted our driving habits while gas was high. To keep demand low, rasing taxes by 10-18 cents per gallon would in effect keep demand at bay and raise needed capital for other programs.

The system would work best in a tiered structure. At $20 per barrel, the tax would be 18 cents, at $30 the tax would be 15 cents and phase it out as oil achieves $75 per barrel.

We can all be honest in saying that paying $1.75 instead of $1.63 would not kill any of us. This is coming from a guy who commutes 47 miles per way and whose vehicle requires premium gas. I do recall the pain quite vividly paying 900 bucks per month for gas.

Jan 08 09:50 AM

[jaimefpozo:]

Michael thanks for writting about this. At least this idea is in the right direccion however, I do not think the thought you present is the one to use. No! not in my logic and I do not understand why most people don't see what I see. Forget about tolls, tax on licenses or other, just go to the point where it make sense. Tax oil. Let say 100 % on any increase over $50 dollars a barrel. Why? No matter what way you look, this will benefit us because regarless oil will increase in price and if we do not do it, the canadiens, the arabes and the other foreiners will get our money. (In most cases the multinational wealth is concentrated around just a few}
We need to reduce consumption, we need better vehicles so we do not carry death loads, we need to make cities smallers, we need to innovate on public transportation and housing so we can live together and let the ground around the cities to produce.
There will be other measures to take, for example industrial or veihicular consumption of natural gas or liquid propane, tax them extra in the same way when they use these because gas need to be primarily for homes.
Please let other to see the overall picture because as today individually our minds are brain washed by this psicology of consumerism and politics.(080109)

Jan 08 11:53 AM

[Rikiki:]

Great ideas! I believe petroleum vulerable Europe has the general answer.... Tax motor fuels AND tax big cars by weight or engine size. Talk about demand destruction. In USA because of large geography, I don't think motor fuel should be taxed as heavily.... but still taxed more than now.
ASIDE: I never saw a Ford F150 sized pickup in Ireland where fuel is/was nearly $8.00/USG.

>> J. Wills.. When I lived in Texas, I had almost exactly the same daily (45) commute miles as yours. My Mercedes diesel routinely gets 30+ MPG and during the spike fuel averaged about $3.90/USG. For 21 work days/month plus approx 400 "leisure" miles, my ~80 gallons of diesel cost about $320/month. Your numbers don't compute.
Your ideas are quite credible.

Rikiki

PS. My brother's Jetta VW TDI (diesel) has given >50 mpg on road trips.

Rikiki

Jan 08 01:04 PM

[iberkak:]

If we can't increase taxes on oil now, then when? With all these bail outs and the highest deficit, I don't see a better time to federal tax increase on oil. I agree that the increased tax should be phased out once the gas prices reach $3.00 a gallon. We should never forget the oil prices of summer of 2008. It is time to look for alternatives more seriously.

Jan 08 05:42 PM

[winterisle:]

Why not say,place a tariff on all imported oil-it would create an incentive for domestic drillers to continue drilling and exploration which right now being cut back-not what we need

Jan 09 07:36 AM

[Law:]

I think a gasoline tax increase is what this country needs. Might it effect the economy? Yes, but if we don't do something about the out of control oil consumption then we may as well kiss our prosperity goodbye. The economy is like it is because of high oil prices building up to a climax in the summer of 2008 and the effect it had on the public's ability to pay their loan payments. The country needs to go through a slow restructuring around high fuel costs and the government needs money. So rather than have our governments collapse and send all of the prosperity down the tube, that our forefathers worked hard to build and died on battlefields to protect, we should work together to reduce oil consumption and our trade deficit. We should add 10 cents to the gas tax each year and we SHOULD NOT reduce it if gas goes over $3 per gallon. This last summer people were moving into city centers and urban rail systems were booming and electric car companies had a bright future. In the 70s a lower oil price peak than in the summer of 2008 caused a massive economic slowdown because people had fewer options to reduce gasoline consumption. This time we had more options for fuel efficient cars and more options for mass transit (note all of the urban rails systems built recently such as DART in Dallas, Tx) so naturally the price of oil was able to climb up much higher before the economy crashed (around 100 in adjusted dollars per barrel in the 70s and 156 dollars per barrel this time). Give us more high quality mass transit rail systems more fuel efficient cars and even range extended electric vehicles and we might be able to survive $200/br or higher oil prices. If Chavez and the rest of OPEC had what they wanted oil prices would go back up to $150 and in this economy, we would have another round of economic collapse. They are going to do this folks. But our response to their reduction in supply should be an increased gas tax and another 5% decrease in demand. That might sting the economy a little, but it's better than another round of economic collapse that $150/br oil will cause.

Mar 07 11:30 AM