<Thoughts after a trip to Botswana The Oil Drum France and Italy: is nuclear power the way for energy independence?>

108 comments on A Better Gas Tax?

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tstreet on March 24, 2008 - 12:10pm Permalink | Subthread | Parent | Comments top

I know the purpose of this exercise is to assess the best way to tax and I agree that a percentage tax is better than a fixed tax. However, we still have the problem that it is very clear that demand elasticity is very low within the U.S. Massive increases in gas prices over the last few years have resulted in almost no reduction in demand. Besides, taxes spread the pain to everyone, the frugal and the extravagant. Under a gas tax regime that actually significantly decreases demand, even a person who consumes below the average consumption will be negatively impacted, especially if he/she is of low or moderate income.

Rationing is the way to go so that those who have figured out a way to consume moderately will experience no tax based increases in price paid. They are rewarded for their frugality. Those who, for whatever reason, consume beyond their allocated amount pay the price at the pump plus the market price of gas certificates or credits. This is similar to a cap and trade system,but applied to consumers. In addition, those without cars, including the poor, can supplement their incomes, or lack thereof, with payments for their gas certificates.

Those of us who have already made choices to reduce our demand would probably fall within a gas ration that reduces the current supply by 20%.

Best hopes for rewarding future frugality and conservation.

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jeffvail on March 24, 2008 - 12:40pm Permalink | Subthread | Parent | Comments top

There's a huge anti-rationing sentiment in America. We tend to think of it as "communist," "un-American," or against the "free-market." I'm not disagreeing with your suggestion, just suggesting that this policy be framed differently: provide a tax credit (or even an outright rebate) on annual federal tax returns for $XX, equivalent to whatever level tax an individual with "reasonable" consumption would pay (and use that gasoline tax to pay for this rebate). This allows those without cars, or who use very little gasoline, to avoid penalization, without uttering that forbidden word (in American politics): rationing. By the way, we already do this kind of rationing-via-tax code in many places in America.

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jewishfarmer on March 24, 2008 - 1:55pm Permalink | Subthread | Parent | Comments top

Nice article, Jeff. I do think that it is more than possible, though that you are overestimating the opposition to rationing in place. In fact, historically speaking, rationing has been a pretty easy sell once enough people want to sell it. I agree that we have a strong prejudice towards free market solutions, but all we need are a very small but highly publicized instances of actual shortages, and people's attitudes generally change quite quickly. I've written more about this here, but I think rationing could enter the bag of tricks really quite rapidly: http://sharonastyk.com/2007/06/15/could-rationing-be-made-palatable/

Sharon

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Shaunus4 on March 25, 2008 - 10:01pm Permalink | Subthread | Parent | Comments top

Hi Sharon,

I completely agree. I wonder if you are familiar with historian Dr. Mark Roodhouse's study of the history of rationing in the UK and the implications for present policy? It is a fascinating piece of work, in which he argues that advocates of carbon rationing can strengthen their case by revisiting the history of rationing during the 1940s and 1950s.

He highlights (among other things) that in 1939 and 1940 the UK government rejected proposals to rely upon increased taxation to cut consumption because the impact of tax rises would be slow and inequitable, and that they instead looked for the best way to cut consumption quickly and ensure that reduced supplies were shared out equitably - rationing.

While Dr. Roodhouse's focus is on carbon, he considers Dr. Fleming's TEQs proposal, which is designed to simultaneously address both climate change and Peak Oil.

Incidentally, I also recently found this rather nice story looking back from 2021 to the day when TEQs were introduced in the UK in 2011!

All the best,
Shaun

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Spaceman on March 25, 2008 - 10:42pm Permalink | Subthread | Parent | Comments top

Two things come to mind:
The historical opposition to taxation runs much deeper than any objection to rationing and was a major if not the major driving force in the formation of our country.
We already have a functioning precedent in the way the electrical grid deals with shortages, rationing in the form of rolling blackouts and brownouts.

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eric blair on March 24, 2008 - 6:10pm Permalink | Subthread | Parent | Comments top

There's a huge anti-rationing sentiment in America.

Rationing has not been popular elsewhere either. So long as the myth of 'you are upwardly mobile if you work hard' exists in the US of A....so long as people who are not middle class see themselves as middle class....rationing will still be seen as not the best way out.

Rationing was done during WWII, 'accepted' by the population...as it were. The promise was 'there will be an end'. Peak Oil looks to be an unending shortage of liquid fuel.

Before 'rationing' there will be 'fuel for these services paid by taxes 1st at low price' in a reaction to tax load.

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Shaunus4 on March 25, 2008 - 10:07pm Permalink | Subthread | Parent | Comments top

I would agree that it is crucial to the public acceptance of rationing that 'there will be an end'. The Mark Roodhouse historical paper I referenced above in my reply to Sharon also emphasises this.

But I would disagree that the permanent nature of Peak Oil implies permanent rationing. The purpose of a well-designed rationing system must be to stimulate and support the transition to a society of leaner energy use. If it achieves its purpose it will make itself obsolete. If it fails in its purpose we will be overwhelmed by climatic feedbacks and a different type of end will be rolling into view...

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Engineer-Poet on March 24, 2008 - 7:21pm Permalink | Subthread | Parent | Comments top

Under a gas tax regime that actually significantly decreases demand, even a person who consumes below the average consumption will be negatively impacted, especially if he/she is of low or moderate income.

You're assuming that the tax is increased in isolation.  Why?  No less a luminary than T. Boone Pickens has suggested that employment taxes be reduced by the same amount as fuel taxes increase.  This would put money back into the pockets of workers, most of it at the low-income end where employment taxes weigh most heavily.

Rationing is as damaging as the 70's-era gasoline allocations (which produced long gas lines in some parts of the USA and no waits elsewhere).  It fails to influence behavior except at a very arbitrary dividing line.  Take me as an example.  I go through an 18-gallon tank about every 2-3 weeks; if the ration was set at the average consumption of about 12 gallons/week, I'd have plenty left over.  I'd have no incentive to change; I could save fuel, but it wouldn't pay me anything to compensate for the inconvenience.  Neither would it give me any breathing room for an emergency.

A fuel-tax increase would pay me every time I didn't drive someplace, every time I coasted up to a traffic light (which I already do), and for every other act which cuts fuel consumption.  If it was offset by a cut in my FICA taxes, I could just pocket that money and live better.  Rationing has no upside.

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Spaceman on March 24, 2008 - 11:23pm Permalink | Subthread | Parent | Comments top

If it was offset by a cut in my FICA taxes

Got any proof of this previously occuring?
Any proof of any rollback of any tax anywhere, anytime without being demanded by the constituency?

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Engineer-Poet on March 25, 2008 - 2:01am Permalink | Subthread | Parent | Comments top

We seem to be able to get tax cuts for the rich.

If your only purpose here is nay-saying, just GFY.

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Spaceman on March 25, 2008 - 10:30pm Permalink | Subthread | Parent | Comments top

Your elegant prose and incisive wit will surely attract scores of adherents to your peculiar form of reasoning.
Let me try it, TSTY.

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108 comments on A Better Gas Tax?

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