Let's Talk Gas Tax (Poll)
Posted by Robert Rapier on September 18, 2006 - 12:05pm
Topic: Policy/Politics
Tags: alternative energy, carbon tax, gas tax, global warming [list all tags]
First, I would like to poll the readers to get an idea of where people stand on this issue. The current federal gasoline tax is $0.184/gal. How high do you think gasoline taxes should be?
- It would obviously lead to conservation, which would help preserve our remaining fossil fuel endowment.
- It would encourage mass transit.
- It would make alternative energy sources more competitive with fossil fuels, without favoring a particular option.
- It would encourage more efficient city planning, and reign in some of the suburban sprawl.
- It would make the price of fossil fuels more reflective of the negative externalities that are not currently priced in (global warming, military expenditures, etc.).
- It would penalize alternative energy sources with low EROEI and reward those processes with higher efficiency.
So, what do TOD readers think? I am looking for critiques, disagreements, and just general discussion on the advantages and disadvantages of a much higher gasoline tax. I would like to come up with something that is palatable to the majority of people, and I want to push this idea to our political leaders. The knee jerk reaction will almost always be "no new taxes", and this is why I want to work through the issues with TOD readers before I start to push too hard.
Look at what happened recently with the "Transportation Bond Act" passed by NY voters last year. It passed because it was supposed to be earmarked for transportation. In reality, a chunk of it was used to pay off the previous transportation bond act, enabling the state to use the money that was supposed to go toward that for their own pet projects. IOW, the money the voters thought was going to transportation infrastructure was siphoned off and used for other things.
Blue states like NY seem to accept that as part of the price of doing business. Red states like Ohio don't buy it, and vote down such propositions.
The problem we had in NYC was decades of corruption, unresponsive public authorities and a state government that vetoed many good city projects and moved the money upstate. Robert Moses personally blocked all major mass transit projects and moved that money to highways for about 35 years. Then we hit the financial crisis of the 1970s and everything was put on hold while they put the finances back in order.
Mind you, New York City pays out more than $24 billion in taxes than it gets back in government services from the state and Federal level.
We have some very uncorrupt, competent and capable leaders right now in the city at least. Trying to clean up the mess of earlier generations that put the present ahead of the future.
The People ride in a hole in the ground.. it's a helluva town.
I agree, but I think the funds must primarily be given back as tax credits in order to sell the tax increase. I envision determining how much the gas tax would impact the average income family, and giving back a tax credit to offset this. That tax credit would gradually vanish at higher income levels. A portion should be earmarked for funding NREL and similar agencies, or for giving rebates to help purchase fuel efficient cars.
I think taxes need to be levied, but at the state and local level where there's much greater accountability and transparency and citizen input as to how revenues are spent.
If every state would implement a similar tax, that would work. But they won't. California might put on a $1 tax, and if Nevada and Oregon didn't follow suit there would be a lot of Californians driving across the border to get their gas.
Bwahahahahahaha!
Here in Illinois, we just sent a governor to prison. Chicago corruption is legendary.
If you provide credits to offset the tax, then you severly decrease the revenues for your project. IMO, monies for PO and AGW must come from the general fund because the monies needed to do anything serious is far greater than the amount raised by a gas tax net of credits alone. I offered a national solution for this quite awhile ago at TOD.v1--The dismantling of the global US Empire and its support structures would free up over a trillion dollars per YEAR to use toward mitigating AGW and PO, with no new taxes needed other than the repealing of Cheney's tax cuts. And just think of the drastic reductions in carbon emissions and petroleum use rolling-back the Empire would make possible. IMO, Powerdown starts with Imperial rollback.
The objective is not to generate (net) revenue. I agree that going that route would kill any chance of success. The objective is merely to raise the price of gas, raising the incentive for conservation and alternatives - without punishing consumers. It has to be more or less a "free lunch" in order to sell.
We could even sell it as a "punish Big Oil". Because conservation will cause less gasoline to be sold, it will have a negative impact on revenues. So, I might have to fight Big Oil on this one.
Personally, a gas tax refunded via a cut in payroll taxes would be a great deal for me. I don't drive much, since I live walking distance from my office.
But if everyone does what I'm doing, the government will be losing money, unless the gas tax increases or the rebate decreases.
Interesting, there are two potential stimuli to the economy: revenue would decline, increasing the deficit, and so would the transfer to oil states: the "oil tax" effect.
In theory you'd need to reduce the credit faster than revenues declined, to keep the economy on an even keel.
There are enormous constituencies for low gas prices, and very few for raising gas prices. Any politician who voted to raise the prices of gas would be voted out post haste.
I don't believe that our present Congress would pass such a bill, and I'm positive Bush would never sign it into law. In addition, I find it hard to believe that ANY future Congress would vote to raise these taxes. And what future president would sign it into law?
Better to let progressive shortages do the price lifting for us. Even if the price is coming down now, nothing short of a major recession will protect prices from going up next year. And the year afterwards, etc.
Another words, you want a solution where everyone can continue to chow down two large pizzas and a large cake without gaining a single ounce. Do you remember the phrase "No Pain, No Gain"?
Because Roberts plan is to refund tax money back. Therefore consumers aren't truely burdened by the tax.
Most people aren't burdened by the cost of home lighting, but they still have a strong incentive to buy CF lamps and capture the savings. Same thing with a gas tax and per-earner (i.e. not influenced by gas consumption) refund.
A fossil carbon tax needs to be effectively global to prevent even more flight of manufacturing to the 3rd world. A tarriff on goods based on embodied fossil energy could bring this close to reality.
I still think Carter's oil import quota concept would be more effective than a simple tax.
The gas tax scheme that I invision would be very simple:
- Tax all fossil fuel sales at a rate determined by the TOD poll.
- Split the proceeds equally among all citizens.
Since most people think that they are less than average users, this scheme might actually sell.ha ha! That wouldn't suprise me a bit. But one thing I'd try for is a zippy name. Because you can't fly anything unpopular without a good name. So I propose the the following:
Patriot Tax
Energy Independance Tax
Energy Security Tax
Homeland Defense Tax
I'm sure someone out there will have something better...any takers?
***
I don't think so. Very few Californians live within 100 miles of either the Nevada or Oregon borders. It COULD work in California if there were the political will here.
AS
But, same problem as at the Federal level, we don't have the will. People in the U.S. don't have the right mentality for a gas tax. Put simply, collectively we just don't give a damn. This is different than how things our in Europe where there is real concern about the impact of pollution and thus people are more accepting. I've said this before elsewhere when discussing this topic and I'll say it again here: our problems are not political, they are cultural! And changing an entire culture is extremely difficult and it doesn't happen over night.
If understand this correctly. You want to impose a gas tax and then refund the money back to consumers? How will that curb consumption? All consumers will do is funnel that tax credit back into their consumption. Some enterprising business will offer loans on their gas tax credit (as the do for income tax returns) so that consumers can continue immediate gradification spending habits.
Plus how do you track consumption? Do you think major of will keep all thier gas reciepts. I can't imagine the waste of man-hours (and energy) involve in managing all of the paper work.
The only real way for the US to curb global consumption is to raise interest rates.
>. That tax credit would gradually vanish at higher income levels.
Thats silly. For high income families, even high prices of 4 or 5 dollars isn't going to change their consumption habits. Hell some of them charter private jets for $7K to $10K for a weekend getaway. An gas tax that can be afforded by the low and middle classes is peanuts for the wealthly.
>A portion should be earmarked for funding NREL and similar agencies, or for giving rebates to help purchase fuel efficient cars.
Fuel efficient cars are already tax deductable. A better option would to increase the gas-guzzler tax and increase the milage rating so that more vehicles are exposed to this tax. The Tax revenues should be used to fund PO mitigation projects, such as water projects to supplement aquifier depletion in the mid west. If people cant eat, it does really matter if they can drive a efficient car or can use public transportation.
But they won't necessarily spend it on gasoline. They might consume, but they have an incentive now to conserve. They will have more money at the end of the day by choosing conservation options.
Plus how do you track consumption? Do you think major of will keep all thier gas reciepts. I can't imagine the waste of man-hours (and energy) involve in managing all of the paper work.
You wouldn't do it like that. You figure out what the average consumption is, and you base refunds on that. Those who consume more than average will be penalized, and will give that penalty to those who consume less. Those who consume less will be rewarded.
Thats silly. For high income families, even high prices of 4 or 5 dollars isn't going to change their consumption habits.
Then they shall surrender cash to those who do change their consumption habits. That is the point. The winners will be those who decrease their consumption. Their winnings will come from those who choose not to.
Spend it on what? What ever they spend it on is going to use fossil fuels. What if they use the refund money to on a vacation 3000 miles away. So instead of using refined gasoline, they use refined jet fuel from the supply of oil. How does that make a difference? What if the gas tax makes it cheaper to fly instead of driving? Or perhaps they will fill up with Ethanol or diesel or some other fuel that does have the tax?
>You wouldn't do it like that. You figure out what the average consumption is, and you base refunds on that. Those who consume more than average will be penalized, and will give that penalty to those who consume less. Those who consume less will be rewarded.
How do you do that? What if I am a handman, repairman or a plow man that requires me to travel for my job. Do you penalize them when its absolutely necessary for them to use a large amount of fuel? Sorry, but you haven't thought this through at all.
>Then they shall surrender cash to those who do change their consumption habits. That is the point. The winners will be those who decrease their consumption. Their winnings will come from those who choose not to.
It wouldn't work that way. The money given back will simply be use to consume products and services that use fossil fuels. All you will accomplish is shifting consumption slightly different and perhaps into different refined petro. products.
If you haven't figured it out yet, Money is stored energy that can be redeemed in just about any form the consumer wishes it to be. The only real way to cut consumption is to cut GDP or decrease the population.
Use fossil fuels at what level? The fact is that countries with high gasoline taxes have lower per capita energy consumption. Coincidence?
What if I am a handman, repairman or a plow man that requires me to travel for my job. Do you penalize them when its absolutely necessary for them to use a large amount of fuel?
Were they penalized over the past year due to high gas prices? What's going to happen to them after oil production peaks and prices skyrocket? Well, they could certainly raise their rates to cover the fuel increase, and I believe they can deduct the cost of fuel that they consume doing their job - even now.
All you will accomplish is shifting consumption slightly different and perhaps into different refined petro. products.
Countries with high gasoline taxes refute your argument. There is a strong correlation between the size of the gasoline tax and per capita energy usage - even in the U.S. among different states.
Robert FWIW, If I have a Chemistry question or a need a someone to dispute Ethanol, your the guy I would ask. When it comes to discussions involving economics and consumption, not so much.
- How does decreasing US consumption affect consumption in Asia?
- What affect on global market oil prices with a decrease in US consumption have?
- What will happen to consumption in Asia if global Oil prices decline?
- How can we (the US and Europe) enact policies within our govts to reduce the consumption of fossil fuel in nations that we can't regulation or enact laws in?
>Were they penalized over the past year due to high gas prices? What's going to happen to them after oil production peaks and prices skyrocket?I am not disputing that we need to reduce consumption. The argument that I trying to get through is that a US gas tax isn't the answer, and isn't going to reduce it if your intention is refund gas tax money back. From my propective you think you've only got a hammer (gas tax) and every problem is just a nail. Your trying to solve one problem, that prevent the gov't from using new income as a source for more wasteful spending, by refunding gas tax money back to taxpayers. If you give them money back, they just use it to consume energy, perhaps in a different form or perhaps not. You have no way of determing how that refunded money will be spent.
>Countries with high gasoline taxes refute your argument. There is a strong correlation between the size of the gasoline tax and per capita energy usage - even in the U.S. among different states.
None of those countries refund their gasoline taxes back to their tax payers. The use them to find there entitlement programs which is a another whole big discussion. BTW, does European gas taxes and regulation affect US consumption? How will a US tax affect consumption in China, India, and the Middle East?
Hopefully I am getting through!
Best of Luck.
Also FWIW, I work in the Planning and Economics group. I do lots of economic analyses.
How does decreasing US consumption affect consumption in Asia?
How has decreasing European consumption affected consumption in the U.S.? Does this mean that European's lower consumption is effectively meaningless? Of course not. They are much better prepared for price spikes and Peak Oil, because they have designed a society around high oil prices. Since we are the world's largest consumer of oil, we need to worry about reducing our own consumption before worrying about what Asia is doing. At the least, we will be better prepared for Peak Oil.
If you give them money back, they just use it to consume energy, perhaps in a different form or perhaps not. You have no way of determing how that refunded money will be spent.
I also have no way of determining how they spend any of their current take home income. But you have no chance of implementing something like this unless it is revenue neutral. Their take-home pay won't change, unless they start conserving. Of course the people who conserve are the least likely to spend extra money on energy, IMO.
Hopefully I am getting through!
I understand Jevon's Paradox quite well, I just don't fully accept it. I also understand your wish to raise interest rates - it is just that I see no path to getting something like that implemented. I see more resistance to that - which might be difficult for Joe Consumer to understand - than a revenue neutral gasoline tax designed to reduce our consumption.
>How has decreasing European consumption affected consumption in the U.S.?
Now your are spining by answer my question with an off topic question. Please answer the question "How does decreasing US consumption affect consumption in Asia?" Any reduction in US consumption will be consumed by Asia. US gas taxation is not a realistic method to control global consumption. Until you can prove that a US gas tax can reduce global consumption your just wasting time. You have not achived any goal.
>They [Europe] are much better prepared for price spikes and Peak Oil, because they have designed a society around high oil prices.
This isn't true, Europe is still very heavily dependant on heating oil, and Natural gas. And I can prove it. Just look at the European Natural Gas crisis and how a lot of business might need to shutdown if they can't get adquite supplies of natural gas. The Gasolinediesel tax has shifted consumption to Natural gas.
Europe's high population density will make it impossible to sustain a modern economy without adquite fossil inputs. For instance, Europe Agraculture is very depend on fossil inputs to maintain high crop yields to feed the population. They are just as unsustainable as the US, and perhaps even worse because they lack any significant coal reserves.
>Their take-home pay won't change, unless they start conserving. Of course the people who conserve are the least likely to spend extra money on energy, IMO.
You cannot increase energy taxes without raising interest rates, otherwise inflation will rise, resulting in higher wages that will remove the expense of the increased taxes. Once inflation kicks in no one will bother to save and opt to spend everything they make in fear of losing it to inflation.
>I understand Jevon's Paradox quite well, I just don't fully accept it.
This isn't about Jevon's Paradox. Its a simple Economics. Global Demand for Oil is already above supply. Therefore if any one nation reduces consumption some one else will immediate use. India and China can not fulfill there current Oil demand. You can read all about their Oil crisis in the India Times. If the US cuts demand by 5 mmb/d tommorrow, it would be immediately bought by China and India. The demand is already there, there will be zero lag.
Am I getting through yet?
>But you have no chance of implementing something like this unless it is revenue neutral
Taxes are not revenue neutral. What other tool is? Answer: Interest rates.
This is really silly. This is just Jevon's Paradox. But I reject that argument that we shouldn't try to decrease U.S. consumption just because people in Asia might consume more. Decreasing U.S. consumption decreases the worst-case scenario possibilities in the U.S. Steps that we take to make our society less dependent on fossil fuels are good steps to take, whether Asia increases their consumption or not. It goes right back to my question about decreasing European consumption. Application of your argument would say that this didn't accomplish anything for them.
This isn't true, Europe is still very heavily dependant on heating oil, and Natural gas. And I can prove it.
Reread my statement: Europe is better prepared for Peak Oil. That they are still dependent on heating oil is a straw man, because it doesn't address my argument that they are BETTER PREPARED than we are. And the reason is because fossil fuels are more expensive there. This has lead to less per capita energy usage, fuel efficient vehicles, widespread mass transit, and little suburban sprawl.
Its not "if they will consume more", its is absolutely asurred. Growth of consumption of Oil in China is constrained by supply. Remove the supply contraint and they will continue to consume more.
Jevons Paradox discusses that conserveration will lead to savings that will fuel growth in the future. In our present situation the demand is already exists. Consumption is contrained by supply. By reducing the US consumption would permit additional oil to flow to India and China help meet their current demand. There would be zero net decline in global consumption
Consider the 1973 Arab Oil embargo. During this time, the demand for oil was above consumption because of supply contraints. When the embargo ended supply consumption immediately increased. This is the situation China and India. have. They already have the infrastructure and population to consume a much larger amount of Oil. The only thing that is holding them back is the amount of oil they can purchase on the open markets.
>Europe is better prepared for Peak Oil.
This isn't accurate. This is would require a lengthy off-topic discussion, and is far off topic anyway.
Maybe they use it to buy energy-saving vehicles, solar panels, or the like.
This is by design. Purchases with less embodied energy will be more attractive to the consumer. Purchases which replace energy consumption with other things will be more attractive. All virtuous choices become more attractive; the government wouldn't have to go picking them out one at a time, allowing the markets to find solutions that policy-makers never would.
The US doesn't have huge entitlement programs aside from Social Security and Medicare. Even Medicaid is being cut back. If you think voters will accept diversion of tax funds after they've been promised a full offset, I think you misjudge the electorate.
How does Chinese dependence on Middle East energy affect US energy security? Aside from making it far more difficult to market foreign-built guzzlers to the US consumer, that is.
I am not disputing that we need to reduce consumption. I am disputing the method of using a gas tax to achieve that goal because it will fail on a global scale. Any policy enacted must reduce global consumption period.
>The US doesn't have huge entitlement programs aside from Social Security and Medicare.
I was referring to Europe's entitlement programs. Robert said that the High gas taxes curb demand in Europe and that it works. But Robert plan is to refund gas tax money back, which is pointless since consumers will just use the refund to buy more gas or use it on something else that also uses fossil fuels. Robert is attempting to slap on a band aid to remove gov't waste on tax revunues. No matter how many band aids you slap on, you cannot fix the fundemental issue