Building Momentum for Gas Taxes
Posted by Glenn on October 24, 2005 - 9:25am in The Oil Drum: Local
We've had many good discussions here at TOD about the efficacy of various measures to better curb our nation's consumption of oil products, in particular gasoline. But we know that most people in the US think gas prices are already unfair. In particular, we've talked a lot about raising CAFE standards versus increasing gas taxes, which are now at 18.4 cents a gallon. And many of the economists over at Environmental Economics have agreed that if you want to truly create a good incentive to consume less, gas taxes are probably the best way to do it.
Now, the NY Times has written a strong editorial endorsement of the idea that keeping gas prices higher through taxes would be good because:
"There's no serious disagreement that two major crises of our time are terrorism and global warming. And there's no disputing that America's oil consumption fosters both."They go on to say that
"The best solution is to increase the federal gasoline tax, in order to keep the price of gas near its post-Katrina highs of $3-plus a gallon. That would put a dent in gas-guzzling behavior, as has already been seen in the dramatic drop in the sale of sport-utility vehicles. And it would help cure oil dependency in the long run, as automakers and other manufacturers responded to consumer demand for fuel-efficient products."And they realize that some of the money collected needs to be earmarked to offset the regressive nature of this tax to some parts of the rural poor that will be hit hardest:
"A bolstered gas tax would raise huge amounts of revenue, roughly $1 billion for every penny of additional tax. Some of that money would have to be used to provide offsetting tax breaks to low-income households, such as an increase in the earned income tax credit."One part of their editorial that I'm not completely on board with is the SUV buy back idea: "...lawmakers could consider would be to use some of the revenue to buy back S.U.V.'s. The buyback notion is a variation on the "scrappage" idea from earlier crises, when it was proposed that the government buy up old clunkers so that their owners could more quickly upgrade to less-polluting cars"
This seems like a waste of money and energy, but it could make the higher gas taxes somewhat more appealing if you were able to trade-in a low efficiency car for a higher one and stimulate demand for hybrids, etc.
In any case, this is the debate we need to start having as a nation. Many of our current problems begin with oil dependency and our future is not bright if we continue that dependency. Raising gas taxes seems like the best practical and equitable measure to start down the road to a lower level of oil dependency.
The only way the idea would seem to have any hope of getting policy traction is by coupling it to a proposal to cut income taxes by an equivalent amount, making it revenue neutral. America needs a whole lot of revenues, of course, in order to cover its deficits, but the gas tax could be increased later to deal with that. The main initial objective should be to get acceptance of the concept of high gas taxes for general revenues (ie, not just road-building) and reduced overseas dependence. The neocons were even talking about the need for gas taxes so as to choke off funding for terrorists (from monies diverted from some Saudi elites) and ratchet down dependence on the unstable Middle East. Thomas Friedman wrote about this in his NYT column a few months back.
Take a look at the big gas guzzlers, and compare them against say a Geo Metro. The sticker price on the entry level guzzler would have been at least 2x more than theMmetro was. However the metro didn't come with all the great niceities and features that an Escape has (and that's one of the lower guzzling SUV's), and thus the only people who would buy a Metro are the people who are looking for the cheapest car.
It's the auto industry which has upsold inefficiency. Up until the Smart car, there's been no high end efficient car in North America which was made to help drive demand towards efficiency. The efficient cars were pushed into the corner and forgotten. The more people wanted to keep up with the Jones, the more people had to sacrifice to efficiency, not just sticker price.
They have a quote from Ford's CEO saying that the era of cheap gas is over. Well, what's Ford doing? When they have a comfortable car which gets at least 40mpg and one can get all the seat-warming-demand-driving options, I'll believe that they actually care. Until then, Ford is duckspeaking.
When the late 80's brought falling oil prices, people went back to their old habits. They were encouraged by an auto industry which sold size and weight (with its attendant thirst for fuel) as prestige.
I used to drive through an intersection on a quiet country road. Drivers on the other road had stop signs, but I could go right through. A new town was developed nearby, and traffic increased, and during busy periods, it became hard for drivers on the other road to get through the stop signs. Eventually they put in a four stop signs. But even when there was no traffic, I had to stop. And during busy periods, people began making up their own rules of precedence. Sometimes, three or four cars would go through at once. I knew it was a matter of time, and one day a crew started installing the poles for the traffic lights. So then, even when there was no traffic, I had to wait for the light. If people could have been a bit more orderly during busy periods, they wouldn't have had to wait for nothing at 11 PM.
I have come to the conclusion that we invite government regulation when we fail to regulate ourselves. By living the cheap gas lifestyle, we are failing in a big way. It would be preferable to find any other way to wean us off gasoline, but I don't think we can wait for the markets.
I can't see any politician backing gasoline taxes, unless it is part of his retirement speech, but some good first steps would be to eliminate special status for SUVs and trucks, and instituting extra taxes on vehicles that fall way outside CAFE standards.
Take your intersection example. The perfect low-tech solution to it would have been a roundabout. The roundabout right-of-way rules allow traffic to flow without the need for electricity to power the traffic lights. And you don't need to wait for the green light when there is no other traffic on the roundabout. But I guess roundabouts are not that popular in America.
You see the roundabout is an example of where a regulated solution does not hinder the users too much but still places a rigid structure that must be adhered to.
We need more 'roundabout' solutions to the coming energy crunch. Regulated solutions that allow individuals/organisations to innovate to reduce any hindrances. The best regulations should help to guide us, not force us, down a certain path.
To your point, I like some of the regulation proposed in this thread, much of which is much more rewarding to the thrifty than a gas tax. If the government simply stopped underwriting inefficient vehicles, that might induce thriftiness as much as any tax.
And I have another concern: Where would the tax money go? Given the irresponsible way the US government has used all the tax money I've given lately, I've no confidence it would not end up in the pockets of the administrations cronies. I'm a liberal, and I've never been a supporter of the point of view that government is bad - but with corruption on such a scale comes the destruction of confidence. Now I am trying to plan for the coming storms, and I need that money to prepare. The rising fuel costs are hurting, and I think I'd rather keep it for my family than have it stolen or squandered on outrageous mistakes.
Bottom line: The only way I would support it now is if it were heavily graduated to alleviate the burden on the poor, and if all of the revenue generated, along with massive portions of the defense budget, were spent on changing the nation's energy infrastructure away from oil.
Suburbs can aptly be compared to a fast growing cancer. Chemotherapy is a poison designed to kill all fast growing cells, including cancer cells.
A sharply higher gasoline tax is a form or chemotherapy that the nations needs to take in order to have a chance of surviving the post-Peak Oil age.
No, I never fell for it either, but so many have. I doubt that a small gas tax alone would push them over the edge en mass, but in regard to "killing them off", I try to remember there are people who live there, and some of them are my friends. Where will they go? How will they survive? I don't know what percentage of the middle class has bought into this unsustainable lifestyle, but I doubt our society can stand the insolvency of so many families.
I recognize that those who have made major mistakes in judgment will pay a price, but still I cannot wish such misery on them.
Imagine you put 50c tax on gas this year and announce that every year from now on you'll raise it with just a quarter. Then everyone will have time to prepare and plan for the future, buy efficient car, small house near the downtown, demand mass transit etc. Yes people will suffer, but not many will get broke and maybe in 30-40 years suburbs will be just a distant memory.
In fact if Jimmy Carter or Ronald Reagan had done that now we'd have had another (much more human-like as opposed to car-like) USA. I often think of the latter as the main person responsible for the mess we have now.
The cause of the explosion of SUVs was two-fold, a Congress (a Democrat controlled Congress at that time) decided in the late 80s that CAFE standards would not apply to the US truck fleet. And at about the same time, Saudi Arabia got into an oil price war with Russia, driving oil prices into the ground. These two factors took a few years to play out but by 1990 the trend was starting towards trucks and SUVs.
Meanwhile, from 1990 to 2000 we saw oil consumption grow to almost 20 million barrels per day. Who was president during that time? It was Clinton, and I don't blame him either. He inherited a bad decision from a prior Congress and cheap oil so he tackled problems he could, like the deficit, instead of problems that would have been stonewalled, like diminsihing resource issues.
Presidents are not omnipotent philosopher-kings able to make everything right with Solomon-like wisdom in a few short sentences. Given the economy under Reagan and under Clinton, any attempt by either to do more than occurred regarding oil usage would have been met with massive political resistance from the other party.
And if you don't believe that, check Harry Reid's own website where he's launched his presidential bid. Harry is not talking about conservation. No sir! Democrat Harry Reid is talking about taxing those evil oil companies til they lower gasoline prices again.
Politicians of both parties are mostly opportunists. True visionary statesmen are rare and often rejected anyway. Look at Roscoe Bartlett's example now. A Republican, a conservative Republican no less, and he's the only member of Congress talking about Peak Oil.
Stop blaming politicians and begin to realize that the core problem is the people themselves, all of them, voters and non-voters alike and their unrealistic expectations.
What happened is that we elected R.R. who:
a) Discouraged all energy efficiency measures initiated by the previous administration
b) negotiated with the Saudis the oil price drop to topple the U.S.S.R economy (you can read the Peter Schweizer's "Victory" on this) and
c) caused an artificial recession and distorted public finance at home by applying a mad anti-inflationary monetary policy.
The last one had the side effect of keeping the US oil consuption low during the 80-s in spite of the lower prices. I'm just saying that this was the moment that we had the best opportunity for a breakthrough in our oil addiction which of course was wasted. So... if I make a little harsh analogy: is it the fault of the cruminal or the society that brought up the criminal? For me the correct answer is: both. But the responsability is for the criminal because he is the one that did what he did.
We have 10 at the outside. Maybe 15, but not any more.
A tax of 50 cents will do a lot more damage than you think it will, Look for a recession inside of 6 months, even now, but for sure inside of 6 months after a gas tax of 50 cents.
You are talking about killing the poor rural folks, who don't live in town, who have to drive a "piece" to get to town. You are talking about making the poor suffer more. And really sticking it to those who live out in the country to work in town.
I DO NOT SEE any Government money spender being able to keep their hands off that kind of money for long, even if you are able to get them to write it into the code of the tax taking. Give them a few months and that money will find the holes in any law they make, and go poof into the black hole most Government has become these days. Oh it will trickle back out into the nation somehow, but never where you wanted it to go.
Face it folks, 2006 is an election year, as will 2008 And NO SANE politician will be able to pass a tax on anything AND get elected by the cash strapped people.
If they are exempted from having to change (especially the people who moved out to the country but work in town, which is a lifestyle decision and not a necessity) then someone else has to take a bigger cut.
We can give everyone the same marginal incentive to stop burning as much fuel, and take the heat off the poor by giving some or all of the increased taxes back as a deductible on Social Security (or an EITC increase as the NYTimes suggests, though that discriminates against single people). But if WE ALL don't take responsibility for using less fuel, it won't happen. And if it doesn't happen, we're all screwed - the poor even worse than a tax increase would do to them.
Put it this way: someone will have to pay the bill in the end. It can be you and it can be controlled (well by the govt but it is the least evil). It can be by your children or even again by yourself (well after 5-10 years) and being a complete mess. I've been through such messes and I can tell you: if people had such choice before they happened they'd have chosen the first option. Unfortunately most people live for to today or even for yesterday.
Progressive rather than regressive -- poor people by smaller cars which have better mileage. Can be run as a zero-sum system rather than a tax. Subsidizes the capital cost of technology like diesels and hybrids. Doesn't involve the government picking a winner via diesel, hybrid, diesel-hybrid, electric, fuel cell, etc.
I would suggest that in order to compete with foreign manufacturers the US would have to gradually introduce a feebate to give Ford and GM an opportunity to change their ways.
This tax would tax those who "use" (read as "wear") our roads more. Heavier vehicles cause more road wear than lighter ones however, lighter vehicles that drive more miles also wear on our roads. This type of tax would discourage heavy bulky gas guzzling vehicles (such as trucks and SUVs) that aren't neccesary to get from point A to point B. I think this type of tax would have a better possibility of getting passed (seeing that many states are running short on highway construction/maintainance funds).
The fact is that even market fundametalists governments like USA spend 30-40% of the economic output. Why does the almighty invisible hand need that? Like somebody else said - this is the price of civilization. If we want a civilization and a future we need a government that plans for civilization and for a future for at least 50 years ahead. And what we have now is a corporate oligarchy owning a private servicing company called "US government".
Adam Smith's model of capitalism works or assumes that people are rational and make rational decisions. Today's consumerism is not Smith's capitalism. Adam Smith's model doesn't work when people don't act rationally! Marketing and Ad agencies, even politics and government employ large mechanisms to get people to act irrationally. I'm guessing most folks who love our current system and hail Adam Smith haven't realized this is what's happening or they do realize what's happening and only use Adam Smith's model to convince poorly educated people (thanks to the dumbing down of our nations schools system) because they profit off of them.
There's nothing wrong with Adam Smith's "free market" model if his assumptions are correct and in place... however his assumptions don't hold true and therefore his model is not applicable.
How should we collect or determine where highway and road funds should come from? A flat tax? A usage tax? A gas tax? The funds must come from a tax. What's the best one to implement? I would argue the tax I propose isn't as oppressive as a flat gas tax.
A gas tax is also better than per-vehicle fees, since one who owns a old guzzler but uses it rarely is actually making good use of the existing hardware and the energy already embedded in manufacturing it. Those with a long commute should be buying the new efficient vehicles.
But there is a better way to discourage fuel consumption without undue misery for the poor and without giving the government more money to mis-spend. It is called tradeable quotas. Yes, it's "rationing", which is considered a dirty word here in the USA. But ever higher prices and stagnant or falling incomes also means de-facto rationing. Tradeable quotas mean: everybody gets some fuel at an untaxed price. Those who insist on using more fuel than the average amount can buy unused quotas from those who use less than the average (or perhaps don't own a car at all). The free market sets the price for these trades. The government administers this scheme but collects no revenue from it. See Herman Daly's books for more on such quotas.
This would actually take the form of a constant tax per gallon (say $1.33/gallon) MINUS a percentage of the retail price before tax (say 33.33%), and both terms would disappear when they would be otherwise result in a negative tax (for retail prices of $4.00/gallon or more in this case). For gasoline before tax of $0.50/gallon, the after tax price would be $1.66/gallon; at $1.00/gallon it would be $2.00, at $2.00/gallon it would be $2.66, at $3.00/gallon it would be $3.33, etc.
If we are running out of cheap oil, and I think we are, then gas prices are going to rise on their own and don't need any help from us. If we are not about to run out of oil and gas prices are not going to rise, why make them rise anyway?
Frankly, the farmers could use it and so could the drivers of SUVs....
If you can make ethanol for $2 a gallon, and let farmers keep on growing here, what's the beef with ethanol? And please don't try that crap about us starving...it doesn't wash when you look at the facts. Just go look at what your average restaurant throws out at lunch each day, or the statistics on farm growth...
Farmers WANT to farm - go ask a few of them!!
Switching to ethanol would be trading one short-sighted, temporary energy source for another.
But still the question stays whether it is good to solve one problem by creating prerequisites for another one. Modern agriculture is changing the ecosystems in potentially devastating ways - land erosion, extinction of species, reduced carbon cycle etc... My view is that we have to step back (or at least do not expand) land (ab)use and yield it to nature. 150 years after the development of electricity it is madness that human kind is still burning everything it can get around to obtain its energy.
We are not starving now but doesn't mean we should waste with ethanol just to further are wasteful habits concerning gasoline..
Somewhere Richard Heinderberg said that if we were to produce oil from renewable resources it would cost 150-200$ per barrel. It is obvious that we are stealing our lifestyle from the generations to come and I am totally against that - the difference (300%) must be taxed out and invested in renewables, period.
While I'm sure there's some truth here about the impact of the increased costs on the poor, it still seems a bit absurd for the paper to argue in favor of heating oil subsidies one day and increased gas taxes the next.
Their argument for subsidies seems based on the misguided assumption that things will be better next winter. But assuming prices stay high, then so would the subsidies -- year after year -- with little incentive for poor homeowners or their landlords to increase efficiency.
I'm not sure what the solution is, though. We could subsidize better insulation, new windows, etc., but I'm sure people would be more likely to fall through the cracks that way.
Without gas, people whine, moan, and generally stay inside all day.
Without heating oil, people die.
I guess that's the difference.
Another approach would be to use that money specifically to offset externalities not included in the price of gas right now - environmental clean-up, health costs, etc.
Lastly the money collected could be used to invest in building renewable energy sources for the future, like wind, hydro/tidal and solar.
Secondly, I'm beggning to think that the real problem we face is not peak oil, but peak CO2. I just saw a presentation on the CO2 implications of oil extraction from a prof in UC Berkeley Energy Resources Group, I don't have the name available now but I'll probably do a write up of his paper for my blog or thewatt when I have time.
Mixing my thoughts and his info it seems to me there is plenty of oil. Enough so that we'll probably face major damage from climate change before we start to run out of oil . The real danger with oil is supply variability due to climate (e.g. Katrina/Rita) and geopolitical effects. That can make the supply tight at times, but in the long run the kinks can work themselves out, provided the climate hasn't become too uncooperative.
The best argument for such a tax is that virtually all elected politicians would be turned out of office simply for proposing such an unpopular idea. (But, I think they're on to us.)
Democracy is the worst form of government, except for all the others. Capital markets are both inefficient and unfair at distributing resources, except when compared with all other methods.
Sadly, we must wait for reduced supplies and accompanying high prices to discourage the use of fossil fuels because of the unavailability of an all-knowing, benevolent dictator, who in any case could only take power by force.
Maybe, oh my gosh, we should BAN campaign contributions?
It's so crazy, it just might work!
If it is such a good thing for the government to decide how much fossil fuel I should use, then why not not one step further and have gas rationing and military checkpoints to determine if you have driven more than your allotted quota of miles? Government-enforced conservation is another step on the road toward fascism. Which is where we very well might end up anyway.
In my view, the best role of the government in this whole mess is to help fund those massive infrastructure projects that the private sector cannot risk committing to: things such as nuclear power plants, biomass projects (but not ethanol), oil shale projects, mass transit, and misc alternative energy projects and subsidies. Changing a whole mature infrastructure is not something that is going to be accomplished very readily by a short-term profit-motivated private sector.
weight tax, NOK/kg
first 1150 kg 34,75
next 250 kg 69,50
next 100 kg 139,00
rest 161,66
displacement tax, NOK/cm3
first 1200 cm3 10,26
next 600 cm3 26,86
next 400 cm3 63,18
rest 78,93
Engine power tax, NOK/kW
first 65 kW 134,22
next 25 kW 489,54
next 40 kW 979,38
rest 1 657,36
in addition there is:
a 25% tax on top of the import price of the car
a typical european tax on fuel
and in the cities you usually have to pay 15 NOK to enter
a calculator for taxes
examples:
Volkswagen golf
with data from this page
tax:108948 NOK=16735 USD
ford excursion
with data from this page
tax:915373 NOK= 140610 USD
the tax system is similar in denmark, but I believe you pay a lot less in some other european contries.
some comments from SUV-land?
Imagine what these kind of taxes would do to US consumption.
I still have a great deal of trouble with this notion that a finely tuned tax policy is going to get us out of this mess. Taxes are a means of taking someone else's money, and those who can tax are those who have power over the rest of us. Taxation for the sake of discouraging oil consumption is nothing more than state sponsored economic coercion. It is giving even more power to the federal government. Contrary to what has been said here: the government is NOT us, and the government is NOT your friend.
While the government can play a role in funding the mega projects that will be needed, I don't want them in my pants 24/7. And neither should you!
The taxes on fuel in Norway and Britain didn't disappear when those countries suddenly struck oil in the North Sea, and the taxes in the USA did not change when that country became a net importer of oil many decades ago. My point is that the way societies were shaped in the youth of the automobile seems to be very hard to undo. Perhaps the slate needs to be wiped clean by some catastrophic event, like a world war, or peak oil.
Every buerocratic stracture whether public or corporate (yes, corporate) will resist the change up until the end because the necessarry adjustments are very pricy. Not only in terms of money but in terms of secuity - despite what economics says, every large organisation prefers to follow the "old tested way" and will do that until the alternatives knock out the old ways. For example mobile phones offer (in practice and potentionally) enormous advantages against stationary. Yet it took 20 years for mobile phones to take out, and maybe stationary will continue to exist for another 20 years - the previous invesments in this old tech made it look appealing even when it starts to become obvious that the future is in mobile.
Reagan had the thought that cutting taxes without cutting spending would eventually force the gov to get out of "non-critical" areas such as welfare. Bush thinks the same, but does not dare cut spending on today's welfare queens, the farmers. At any rate, the gov is both strapped and controlled by conservatives, so there will be no energy taxes and no more subsidies for the poor, who might freeze, while no farmer is allowed to fail. Does anybody remember that a proposal to limit farm cotton subsidies to $200k/family member was overwhelmingly voted down?
By the way, ethanol subsidies began when oil was under $25/barrel (I think). Now that oil is $60/barrel, and farmers receive a 2.4x higher price for their ethanol product, shouldn't the subsidies be over? Are we finding that as oil goes up the subsidy goes up, too?
Cool impose a new tax. It won't hurt any one but the poor!
The richer folks who live out where they drive 20 plus miles to the work place will just buy a little less, but the poorer folks will eat the costs by not getting any extras at all.
Increase the Tax on a gas GUZZLER first, then talk about a gas tax. Drop the "truck" tax break that made SUV's a money saver car purchase. Make anyone one that wants to own a new gas guzzler pay.
But what to do with all the poor guys in old gas guzzlers? Or the farmers, Hey what about all that diesel being used, are we talking tax that too? Just think when Mom and Pop farmer hear that they have to pay X number of Dollars more on the fuel for the Tractor what they might think about What YOU are going to eat next time. Maybe they will forget about you and just go into living off their own land instead you too.
Be careful How you try to fix the problems, You might end up with more problems not less.
ps, I do not see the tax in our future, I see the Oil just getting less and less.
As for having a conversation as a NATION, nothing will accelerate that like higher gas prices. Believe me, the poor will NOT freeze to death, but the middle class will go kicking and screaming toward more sustainable ideas.