The Pigou Club and the Gas Tax

Prof. Mankiw has suggested an interesting policy, and I must say his arguments are pretty good.

With the midterm election around the corner, here’s a wacky idea you won’t often hear from our elected leaders: We should raise the tax on gasoline. Not quickly, but substantially. I would like to see Congress increase the gas tax by $1 per gallon, phased in gradually by 10 cents per year over the next decade. Campaign consultants aren’t fond of this kind of proposal, but policy wonks keep pushing for it.

He lists a number of reasons why people with disparate interests should find such a tax at least in some ways more palatable than other taxes.

First is the environment. A tax on anything will reduce the amount of that good that is produced/consumed by the economy. As such, less gasoline will mean less pollutants in the air and even less global warming. Such a tax will also reduce road congestion. With higher gasoline prices people will look to move closer to work, utilize public transportation more and/or car pool. We could also, reduce the number of regulations on the books. Instead of Congress wringing its hands over fuel economy standards, the problem would be at least partially solved by higher gasoline prices which would make more fuel efficient cars more desirable. The extra revenue certainly could help offset the budget deficit without raising income taxes. This would also be good for the economy in that money that is being borrowed by the government to pay for its spending could no be loaned out to people who do productive things like build homes, and other commodities. Then there is somewhat more esoteric point concering the incidence of the tax. Irrespective of who the tax is levied upon from a legal standpoint (i.e., where the legislation places the burden) the acutal incidence is borne by both producers and consumers. That is, as people reduce their consumption of gasoline here in the U.S. the price of oil would fall on world markets offsetting some of the price increase for consumers. Or as Prof. Mankiw put it: Venezuala and Saudi Arabia would pay part of the tax. Then there is economic growth. Since the gasoline tax is a consumption tax it also encourages savings and investment. One place we’d likely see some investment is in R&D looking for alternatives to gasoline. Finally, there is the issue of national security. U.S. foreign policy is undoubtedly influenced by oil and gasoline. The more dependent our economy is on oil and gasoline the more our foreign policy will be influenced by oil and gasoline. Where is most of the world’s oil? The Middle East. Hence a gasoline tax and the concomitant reduction on gasoline/oil consumption would reduce the the need to involve ourselves in the Middle East.

All of the above sound like good reasons to raise the gasoline tax. While I don’t like that idea, I agree that the alternatives are not pleasant either.

Update: There has been lots of disagreement in the comments so far. As such I thought I post a link to this reponse to opponents of Pigouvian taxes by Mankiw.

Here are 4 reasons that Mankiw put forward for not liking an increase in the gasoline tax,

1. You deny the existence of these externalities as a type of market failure. Perhaps you think you live in a Coasian fantasy world where people bargain without transaction costs to reach efficient allocations. (Note: I am not suggesting that Coase himself thought we lived in such a world—he considered it only a useful thought experiment.)

2. You recognize the externalities but you don’t think the government should try to respond to them. You are such a believer in small government that you are willing to live with inferior economic outcomes, such as pollution and congestion.

3. You recognize the externalities, think the government should try to correct them, but think the current low taxes we put on gasoline are sufficient. In this case, you have weighed and rejected the evidence, such as that of Parry and Small, that higher Pigovian would be optimal. (Parry and Small calculate an optimal tax of $1.01 for the United States in today’s dollars. After my proposed phase-in of a $1 hike, the U.S. tax would be $1.40. Assuming 10 years of 3 percent inflation, the tax in real terms would approach almost exactly what Parry and Small recommend. By the way, the published version of Parry and Small was in the American Economic Review, September 2005.)

4. You recognize the externalities but think the government should try to correct the market failure through regulations (such as CAFE standards) or through market-based solutions that do not raise government revenue (such as cap-and-trade systems). Perhaps you are concerned that government would waste the extra revenue on useless government programs.

He has a detailed response to number 4, which he thinks is perhaps the largest group. His basic argument is that he doesn’t worry about how the extra revenue will be spent because it has already been spent.

As for the rest, number 1 should have an obvious answer, we don’t live the perfect Coasian world were we can negotiate without transaction costs. If this were the case then there would be no corporations.

That leaves numbers 2 and 3. The area of externalities is one area that many libertarians and like minded people see as a potential area for government involvement. Externalities are called externalities because they are outside (external to) the market. As such, it results in a misallocation of resources and things can be improved. Such improvements can come via bargaining if property rights are well defined and transactions costs are not too high. In this case, we don’t need the government. However, when transactions costs are too high then negotiation will fail and that leaves the government. Still one can argue that even with an externality having the government intervene can be more costly than simply living with the externality and the sub-optimal outcome. I think this argument is fairly persuasive and is the primary reason we should pause before letting the government try to solve the problem.

Still despite these objections there are still cases where the government could improve on things. Most libertarian minded people think that there should be some level of government. Typically they limit it to things like national defense, police, the fire department, and courts. Maybe a few other things. However, the police and fire departments are, in my view, more accurately viewed as attempts to deal with externalities. High crime can impose economic losses indirectly. That is, even if you don’t suffer as a direct victim of crime, higher crime levels might lower your property values, or make you spend money on things you’d rather not spend it one (security systems, a firearm, etc.). So, many libertarians already acknowledge that addressing externalities via government coercion is legitimate.

So unless you are an anarcho-capitalist (i.e. you don’t want to see any government at all) you are left with number 3. But unless you have some data on which you are basing your rejection of an increase in the gasoline tax you really don’t have much reason at all for your position other than you just don’t like the idea of raising taxes. Well neither do I, but unfortunately I don’t think we can avoid raising taxes. Sorry, but with Bush increasing government liabilities and reducing tax revenues it just doesn’t bode well for keeping taxes low. As Mankiw notes, we’ve have basically spent whatever money the increase in the gasoline tax would raise. We spent on giving seniors a prescription drug benefit.

FILED UNDER: Economics and Business, US Politics, , , , , , , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. I don’t know Steve. Gas hovered above $3 a gallon here in Atlanta for awhile, and it didn’t seem to do anything positive for traffic. It’s almost like people were defiantly using their vehicles anyway.

    I suppose that could be a short term thing where people knew it would eventually come down again.

  2. Triumph says:

    First, Steve, what do you do with the money? COntinue piling it into the HIghway Trust Fund? Secondly, do you give states the ability to raise their portion as well? Currently it is limited under the highway bill.

    Its great to see you embracing the Gore Doctrine!

  3. Steve Verdon says:

    I suppose that could be a short term thing where people knew it would eventually come down again.

    Exactly! Changing cars, changing driving habits, and changing where you live take a fair amount of time. If drivers see the $3/gallon as transitory they may simply reduce driving that is seen as unneccesary (e.g. going for that Sunday drive, driving to a resteruant nearby vs. the one several miles away, etc.).

  4. Steve Verdon says:

    I have no idea what the Gore Doctrine is, but if it is the same as Mankiw’s idea then I support it.

  5. LJD says:

    This doesn’t pass the smell test. Such an increase would have a ripple effect across many, many other industries, consequently raising prices of many more products besides gasoline.

  6. Triumph says:

    I have no idea what the Gore Doctrine is, but if it is the same as Mankiw’s idea then I support it.

    Gore has advocated this same type of taxing scheme for a couple of years–primarily for the environmental benefits.

    But what about the money? Mankiw is not really clear on where it would go? Right now, the federal gas tax is not discretionary, but that seems to be what he is arguing for. Im not sure if that is a good idea.

    A related tax has been instituted in London to minimize congestion–the main difference is that the revenue generated has been used to finance more efficient mobility schemes.

    The elasticity curve on gas in the US suggests that this is just going to be another rise in taxes and strain on incomes.

  7. The biggest problem with this proposal is that such a consuption tax in isolation is extremely regressive. I can honestly say that raising gas by a dollar a gallon isn’t going to change my driving habits one iota — because I value my time and freedom of mobility so much more than the extra $15 per tank. Alas, not everyone is in my situation, and those who must make due on substantially less will feel the pinch much more severely. The effects on some small businesses will be immensely negative. Of course, some would then argue for ever more complicated schemes for rebates, rationing, and what not, but do we really need to give the government yet another social engineering hammer to wield like a scalpel as they try to pick winners and losers?

    And, naturally, I despair of the seemingly obligatory isolationism of “we could ignore the Middle East (and Venezuelan Castro wannabe) if we weren’t so dependent on their oil” finale. Please. If GE suddenly came up with a workable, affordable, fusion device safely scaleable down to 100 horsepower generators, do you think the Middle East (and loony leftists Caudillos) would just as suddenly cease to be a foreign policy concern? The correlation coefficient of our need for oil and the problems of the Middle East (and Venezuela) is something less than 100%. I don’t know what that number is, and I’ll grant that it is significant, but it isn’t quite that high. It certainly isn’t high enough to use as a rationale for implementing just such a gas tax.

    Personally, I probably would favor raising the gas tax, though not quite so substantially, and putting the income into the general fund. Dollars are fungible, so we would all be a lot better off if we quit earmrking dollars for this from that source or dollars for that from this source and instead dealt with the government’s budget in a professional, adult manner; but that’s probably too much to ask.

  8. Bithead says:

    Not just “no”, but “Hell, no!”

    Out.

  9. Caliban Darklock says:

    Let’s test this theory.

    I commute some 60 miles each way to and from work, and I get roughly 27 miles to the gallon. That’s about 22 gallons a week. If the price of gas goes up $1 a gallon, my weekly transportation budget goes up $22, but it doesn’t change the amount of gas I buy. It can’t. I simply have to buy that much gas. There is simply no other acceptable choice.

    I could move; I saw an ad for a house very much like mine on the bulletin board at work. It’s just a few minutes away, and they’re only asking $880,000. Too bad I can’t afford a million dollar house.

    I could take the bus. But public transportation can’t get me to work in less than 3 hours, and I’d rather spend that six hours with my family.

    I’ve looked for a carpool that goes from where I live to where I work. There aren’t any. Oh well.

    Buying a more fuel-efficient car isn’t an option, because I’d be trading a zero car payment for something undoubtedly more than $80 a month.

    I might change the parameters of my job search the next time I switch jobs, which I don’t expect to do anytime soon… but since salaries in my field are some $40,000 KPA lower near my house, realistically I won’t even do that.

    I suggest that the vast majority of Americans are closer to my circumstances than they are to those of college professors. Colleges are replete with cheap carpools to fit any schedule, public transportation that often runs 24 hours a day, and a vast array of amenities within walking distance. These are not normal circumstances for the average American. The incentives are very, very different.

  10. James Joyner says:

    I must say, a tax for the express purpose of altering market behavior is the antithesis of “libertarian” thinking.

    It seems to me that, either gasoline is scarce or it isn’t. In the first case, the price will naturally go up according to the elementary interaction of supply and demand. If it isn’t, then why do we need pressure to wean ourselves from it?

    As for the environment, it’s far from clear to me why this is a preferable way to handle that than regulating fuel composition. At least the latter has the benefit of directly targeting the problem.

    As to the foreign policy angle, we’d still have the Israeli-Arab mess, the threat of a nuclear Iran, and jihadist terrorism. While oil may have been a major reason for our involvement in the region, we’d still have plenty of entanglement even if we figured out how to make cars run on water tomorrow.

  11. graywolf says:

    Taxes are to raise revenue for government (and it’s many worthless,wasteful functions.)
    I’m against the mortgage deduction, for that matter.

    A large gasoline tax is really large-scale social engineering.

    A very large gasoline tax will cause significant economic, demographic and social change.

    Beware of the “law of unintended consequences.”

    We will not free ourselves of foreign oil until we either:
    a) Start drilling in all of these hallowed protected areas (ANWR, Atlantic coast)
    or
    b) Come up with serious,profit-making alternatives.

    Right now, the luddites have our economy up a tree insisting on various “wet dream” alternatives.

    A huge gas tax doesn’t get the alternatives any quicker, discourages new drilling and would probably drive the economy into a recession.

    In line with Charles Austin (above). As the only superpower, there is no part of the world we can ignore. Reducing middle east oil doesn’t make these problems go away.
    9/11 would happen if we drilled 100% of our oil.

  12. Steve Verdon says:

    Triumph,

    The elasticity curve on gas in the US suggests that this is just going to be another rise in taxes and strain on incomes.

    Really, do you know the elasticity of the demand for gasoline and that it is unchanging over time? As for what to do with the money, there isn’t much discussion of it, my guess is it would be general tax revenues.

    Charles,

    The degree of regressivity depends on how much gasoline people of different incomes consume. But in the end, it would probably be regressive. However, this isn’t that big a deal as far as I can see, the payroll tax is horrendously regressive. For some of the rich they basically pay 0% of their income in payroll taxes.

    Caliban,

    So, you are never going to move, never take the bus, never car pool and never buy a new car. Eventually you will lower your consumption of gasoline when your car completely dies.

    James,

    I must say, a tax for the express purpose of altering market behavior is the antithesis of “libertarian” thinking.

    Yep, but it also is for helping to finance the government’s spending. And since most libertarians acknowledge that some level of govenrment is necessary it isn’t that bad, IMO. Also, I’m not totally doctrinaire in my approach to economic policy and libertarianism. Some times the government has to do it.

    It seems to me that, either gasoline is scarce or it isn’t. In the first case, the price will naturally go up according to the elementary interaction of supply and demand. If it isn’t, then why do we need pressure to wean ourselves from it?

    Well that is where all the other arguments come in.

    -environment,
    -less regulation (a pro-libertarian argument…sorta)
    -getting the Saudi’s to pay part of it.

    Regulatory targets can and often do backfire/lead to unintended bad outcomes. On example was the switch from MBTE to ethanol. That is one of the reasons we saw big price spikes not to long ago. Further, they create opportunities for rent seeking which are themselves wasteful.

    As to the foreign policy angle, we’d still have the Israeli-Arab mess, the threat of a nuclear Iran, and jihadist terrorism. While oil may have been a major reason for our involvement in the region, we’d still have plenty of entanglement even if we figured out how to make cars run on water tomorrow.

    Yes, but if we don’t have to worry so much about pissing of the Saudi’s that strikes me as a good thing. After all, Wahabbism is HQed in Saudi Arabia and if firmly entrenched there. And it is the Wahabbists that the “war against islamofacism” is really targeted against. Without being able to do something about the ones in Saudi Arabia means everything else is like peeing in the wind.

    Greywolf,

    The drilling in ANWR and elswhere argument is really a non-starter. There just isn’t enough oil there, and given that oil is a globally traded commodity it isn’t going to have as much of an effect as you imply.

    And yes, a tax would make alterantives, and looking for efficacious alternatives, more profitable.

    9/11 would happen if we drilled 100% of our oil.

    That will never happen without first invading Canada and then Mexico.

  13. So you want to do some things that YOU consider “good”. And the way to do these good things is to take money away from others. Because convincing people to do the good things YOU want to do is “too hard.” It is just much simpler to take people’s money away against their will.

    This is the definition of a “thief”. I am sorry you never learned that other people’s property is never yours to take away, no matter how good your intentions.

  14. Steve Verdon says:

    Director Mitch,

    Hand over you wallet or else….

    After reading your blog, I found this gem:

    CA State Unemployment – This is taken out for pretty much anyone having a job in California and caps out fairly early in the year. I really can’t complain on this one since I am still ahead of the game from previously collecting unemployment benefits. And this is a social service that I actually receive a benefit from, unlike Social Security.

    You “want to do some things that YOU consider “good”. And the way to do these good things is to take money away from others. Because convincing people to do the good things YOU want to do is “too hard.” It is just much simpler to take people’s money away against their will.”

    And then there is this post.

    Clearly Bush is a “thief” since he didn’t zero out all federal taxes. In fact, he has increased government liabilities by trillions, as you noted in another post (which linked to one of my posts). This means that down the road taxes will have to go up.

  15. RJN says:

    Amen, Director Mitch.

    What a brutal idea. Stick it to the rural folks, and those who must drive to work even if they only make $12.00 per hour.

    It is also a stupid idea; the money will be wasted, and as for saving the environment, make Gore and his pals give up their jet airplanes.

  16. Dave Schuler says:

    Since I’ve favored just this sort of tax for the last 30 years for the reasons stated and more, I certainly think this one’s a good idea. $1 isn’t enough, however for the reasons stated above.

  17. LaurenceB says:

    It strikes me that many of the comments here opposing a gas tax are nothing more than arguments against any tax. Meanwhile, I (and others) recognize the reality that some tax is inevitable – so, for us, the task at hand is simply to discern which sort of tax is the least odious. From what I’m reading, it seems that the gas tax is a strong contender for that honor.

    Mark me down as a proponent.

  18. Triumph says:

    Really, do you know the elasticity of the demand for gasoline and that it is unchanging over time?

    Yes, Steven, I do. Take a look at Nicol’s 2003 piece in Energy Economics. For the US, he calculates it at the short-term at -0.26 and long-term -0.86. Importantly, he shows that there are regional difference. Of course elasticity is not unchanging over time.

  19. Steve Verdon says:

    Yes, Steven, I do. Take a look at Nicol’s 2003 piece in Energy Economics. For the US, he calculates it at the short-term at -0.26 and long-term -0.86.

    Hot damn, I’m impressed! That is about what I recall as well. But look…that 0.86 is fairly close to being unit elastic. So over 10 years maybe this would have an impact, yes?

  20. Steven Plunk says:

    There seem to be too many people looking for a silver bullet to solve our problems. At first glance this looks good but you have to apply the unintended consequences rule that Graywolf mentioned. You also have to look at tax policies in general to decide what they should and should not do. To me, trying to solve so many different problems with a single tax increase seems like oversimplification.

    Each of the mentioned problems should be addressed with multiple policy changes to increase the odds of success.

    Energy independence (which may or may not be good) should include increased domestic drilling, conservation, new technology, nuclear power, and whatever else would help. I’ve heard the arguments that increased exploration and production would only add so much but couple that with the other steps and you can get meaningful gains. A few percentage points from each step would yield great benefits without sending money from my pocket to Robert Byrd’s pocket.

    While the thought of sending cash to middle eastern theocracies is repulsive it may not be counterproductive in terms of stabilizing the region. Without continuing oil revenues what will these people do? How will they take care of their countries? The comparative advantage they have in oil production is probably good for them and us. Without some oil revenues discontent will grow in their countries. A political solution would be more likely to last and be fairest to all. We seek free trade with other countries why would we regress to essentially a tariff on oil?

    The pollution question is one of patience. Technology has increased our ability to mitigate pollution over the years and it will continue to improve our air and water. Too many want it all clean and pristine now. It could happen but it comes at a cost, a big cost.

    Idiots have caused the death of millions because of a stupid fear of DDT based on a ’60’ book. Idiots have ruined the nuclear power industry over a stupid ’70’s film. Idiots have ruined the forest products industry because of ’80’s embracing of spotted owls. Will we now allow a less than scientific movie by a failed presidential candidate drive our policy decisions? We need to set policy on real science not the last graduate student’s thesis written to impress his hippie professor or Al Gore’s movie.

    As for the budgetary problems of the Unites States one needs to look at spending not revenues. To do otherwise is only a short term solution. We also have no idea what a tax like this would do to the economy. A dollar sent to the government is a dollar not spent at a local merchant. It’s not a gamble we should take lightly. The economic damage could be huge and long lasting. Especially long lasting since getting the tax off the books would be next to impossible after the government becomes accustomed to the revenue stream.

    Like building a house policy solutions should be varied and tackle specific problems. These policy solution should be formulated by specialists in the same way a plumber fits the pipes and an electrician wires the house for power. That specialization yields a good house for reasonable cost. There is no silver bullet to cure all that ails us so we should quit looking for it.

  21. Steve Verdon says:

    There seem to be too many people looking for a silver bullet to solve our problems. At first glance this looks good but you have to apply the unintended consequences rule that Graywolf mentioned.

    I’m sorry, but I have a hard time taking this seriously. The objection seems to be: there are potential unintended consequences with this one policy. Therefore the solution is to have lots of little policies.

    Uhhhmmm…what is there to prevent lots of unintended consequences from all these policies? And what exactly are the unintended consequences of increasing the gasoline tax vs. say your policies of energy indepence? And exactly how do you plan on getting conservation? Regulations such as CAFE or cap-n-trade? Just curious.

  22. I apologize for not having the time to respond more fully, but the four reasons offered by Mankiw don’t necessarily cover the universe of options, especially if one doesn’t start with the utopian statist assumption that the government can fix the world and everyone who doesn’t think so is a dolt, or lives in a fantasy world, or both.

  23. By the way, interesting thread and a good discussion. Sorry if my last comment appeared less than generous, it was not my intent.

    By the way, I concur that numerous other taxes are terribly regressive, but that’s not a good argument for adding still more of them.

  24. Steve Verdon says:

    I apologize for not having the time to respond more fully, but the four reasons offered by Mankiw don’t necessarily cover the universe of options, especially if one doesn’t start with the utopian statist assumption that the government can fix the world and everyone who doesn’t think so is a dolt, or lives in a fantasy world, or both.

    Such an assumption is not in Mankiw’s post. For example, you could select option 2.

    By the way, I concur that numerous other taxes are terribly regressive, but that’s not a good argument for adding still more of them.

    It is if one of the other options is to raise the payroll tax.

  25. djneylon says:

    Anyone who thinks increasing the price of gas by between a third (last year’s gas price of $3) or half (current price of around $2) will not have major consequences economically isn’t thinking clearly. Real gas prices have moved in a very narrow band for years. Now you are talking about a permanent steady real increase. Go ahead, kiss the auto industry in this country good-bye. Kiss most tourism good-bye as well. And do you really think the government will spend the money well? One thought: what if you cut income and social security taxes by an equivalent amount, i.e., tax raises X dollars in year one, following year, income tax and social security tax are cut by X dollars? Then, the money would come back into economy, you’d theoretically cut gas consumption, the government would get no additional revenue to waste and you’d help middle class and low income people on who this tax would fall the hardest.

  26. Steven Plunk says:

    Steve,

    The idea of individual policy changes working around the law of unintended consequences is based upon specialists formulating policy and the fact that it is much easier to rescind or adjust those smaller policy changes than one big one.

    The unified theory type of approach is much more likely to create bad unintended consequences than the approach I advocate. Nobody knows everything about everything so letting experts work the policy changes in specific areas is a serious way to get things done. I’m not all that eloquent but think about it, doctors don’t write building codes and builders don’t set hospital care standards. Stick to where you are an expert.

    These smaller individual policy changes can be tweaked over time as we see the results. This would clearly lessen the effect of adverse unintended consequences. Wouldn’t you agree?

    Again, conservation is a part of the equation for energy independence. And conservation includes more than just automobiles. We could conserve a huge amount of diesel fuel by repealing the new particulate standards which are unscientific and have decreased fuel mileage on heavy trucks. You see I know about heavy trucks and other people know about other areas where conservation can take place. Sometimes the power of many individuals outshines the power of the government and it’s policies.

    I’m not all that sure energy independence is the answer either. The comparative advantage of other countries in oil productions means it’s best for them to produce at this time. The political problems should probably be solved politically rather than through economic tricks.

    I appreciate your questions but to say you have a hard time taking these ideas seriously shows a certain contempt that discourages open discussion. It is insulting as well.

    Regardless, I appreciate your posts and your knowledge of economics.

  27. Steve Verdon says:

    Steve P.,

    The idea of individual policy changes working around the law of unintended consequences is based upon specialists formulating policy and the fact that it is much easier to rescind or adjust those smaller policy changes than one big one.

    We don’t have specialists formulating policy we have politicians formulating policy and hence rent seeking. I’m still not convinced that your multi-pronged approach is going to be equivalent, let alone better than the single/simple prong approach here.

    djneylon,

    Regarding spending the money, sorry it is already spent. Bush spent it as did Clinton, Bush Sr., Reagan, Carter, etc. right on back to FDR and the creation of Social Security (and latter Medicare).

    As for the price increases I don’t think that the impact is going to be as severe as you indicate. Other countries have higher real gasoline prices and they haven’t lost their automobile industry, tourism, and so forth.

    One thought: what if you cut income and social security taxes by an equivalent amount, i.e., tax raises X dollars in year one, following year, income tax and social security tax are cut by X dollars?

    As I indicated the money is already spent. Cutting another tax to offset the effect basically means you’ll have to raise another tax somewhere else. The idea of cutting taxes without a massive change in spending and future spending just isn’t in the cards.

  28. RJN says:

    Let me offer a comparison: We import approximately 3.4 billion barrels of crude oil, per year, at a price of $53 per barrel for a total cost of imports of $193 Billion. Compare this with a balance of payments deficit, each year, of $750 Billion on manufactured goods.

    The least pernicious way to raise taxes would be to tax these, job stealing and technology stealing, imports of manufactured goods and apply the money to Social Security. The most pernicious way, to tax, would be to tax the life blood of one-half of the country (the lower paid one-half) through a viciously regressive personal transportation tax

  29. just me says:

    I think a raise in the gas tax is way too regressive and hurts people who can least afford to do what the tax intends.

    The people most hurt are those who work for small salaries and often live pay check to pay check or very close to it. It also will kill people in more rural areas. Public transportation just isn’t available in many rural areas, and there are some places in my fairly rural state where 30 mile or more commutes for work and groceries are the norm.

    Now you and others may say they don’t care, but in general this is one consumption tax that I think would do far more harm to the people who can least afford the tax than good overall.

  30. RJN says:

    Wow. This guy, Prof. Mankiw, (Harvard no less) is a proud sucker.

    I noticed how thinly reasoned his presentation, and choice, of “externalities” was. The globaloney about warming was expected (he is from Harvard) and is easily dismissed.

    The part about how 20 million families could take a major hit in their pocket books, but Prof. Mankiw would have less traffic to deal with was sweetly arrogant.

    However, the prize must go to the savage cost penalty we – I should say poorer families – will deal to the foreign oil exporters. Those brave Americans who pay an extra $1.00 /gal for gas can laugh all the way to the bankruptcy at the $0.03/gal they have liberated from the exporters.

  31. graywolf says:

    “One thought: what if you cut income and social security taxes by an equivalent amount, i.e., tax raises X dollars in year one, following year, income tax and social security tax are cut by X dollars?”

    THAT’s an idea. I could live with that.

    The fairest tax is a consumption tax.
    It taxes choice (purchases), not necessity(work).
    Before anyone gets excited, a fair consumption tax would exempt food, clothes and housing.

    Without an offset, suggested above, a new high gas tax would suck money from the free economy (doing major damage) and get it pissed away by the politicians and pencil-necks.

    I fear that this proposal MAY make sense in the “policy wonk” world, but couldn’t pass the test for a drivers license.

  32. Taxes are too high as it is. ESPECIALLY on energy.

  33. just me says:

    I like the idea of consumption taxes, but only if they are imposed with the permanent elimination of an income tax.

  34. Bithead says:

    Yep, but it also is for helping to finance the government’s spending.

    Which, history tells us only creates more spending. That hardly seems productive.

  35. M1EK says:

    Paying for all road costs, starting with the replacement of large local and state taxes which pay for even major roadways almost everywhere in this country, would be a good start in answering the question “what to do with the extra gas taxes”. Today, most of us live in areas where substantial sums from property and sales taxes are spent directly for the benefit of suburban motorists – those taxes, obviously, are the same no matter how much or how little we ourselves drive, and thus present an incentive for those suburban drivers to continue driving more than they otherwise would if faced with the true cost of their choice.

    Go one small step beyond that to the cost of traffic control and accident cleanup, and it’s pretty easy to get up to at least another 50-100 cents/gallon.

    And, no, the small amount diverted at the federal level for mass transit doesn’t even come close to making up the difference.

  36. Steve Verdon says:

    RJN,

    In no particular order,

    I noticed how thinly reasoned his presentation, and choice, of “externalities” was. The globaloney about warming was expected (he is from Harvard) and is easily dismissed.

    That isn’t the only one. Seriously go suck on your cars exhaust pipe for 20 minutes and come back and post. Car’s and gasoline emit pollution. That is a simple fact. Less burning of gasoline means less pollution. Now maybe you think the current pollution levels are acceptable, but that is what you should argue.

    The least pernicious way to raise taxes would be to tax these, job stealing and technology stealing, imports of manufactured goods and apply the money to Social Security. The most pernicious way, to tax, would be to tax the life blood of one-half of the country (the lower paid one-half) through a viciously regressive personal transportation tax

    Uhhh no. Tariffs do exactly the opposite. They raise prices on consumers and increase unemployment. Not exactly the best way to help the “little guy”. These policies have been tried in the past and without fail they don’t work.

    I don’t know where you get this 20 million figure, but I imagine the people adversely effected by the tax would be large than 20 million.

    However, the prize must go to the savage cost penalty we – I should say poorer families – will deal to the foreign oil exporters. Those brave Americans who pay an extra $1.00 /gal for gas can laugh all the way to the bankruptcy at the $0.03/gal they have liberated from the exporters.

    I just love made up numbers. And even if they were true, you’d be paying $0.97 in taxes, not $1.

    graywolf,

    THAT’s an idea. I could live with that.

    Sorry, any more tax cuts just aren’t going to happen. Bush and the Republicans spent whatever revenues from future tax increases already. Factor in the short falls for things like Social Security and Medicare and you are looking at some pretty steep tax increases down the road.

    Bithead,

    Which, history tells us only creates more spending. That hardly seems productive.

    Well then don’t vote Republican anymore. Seriously, how many of those opposed to new taxes here have voted for Bush? I did, and do I ever regret it now. Sure Gore and Kerry weren’t much better alternatives, and may have been worse, but Bush has increased spending at a breath taking rate. His Medicare Prescription Drug Program will cost trillions and mean higher taxes and possibly price controls on pharmacueticals. That is why I like the idea of gridlock. Unfortunately it looks like Bush is simply going to rubber stamp many Democratic spending proposals.

    Will Franklin,

    Taxes are too high as it is. ESPECIALLY on energy.

    Taxes are too low given all the spending by the Republicans.

  37. RJN says:

    Taxes paid as tariffs raise prices to consumers, but taxes on consumption do not?????

    Our air, except, perhaps for China and India, is the cleanest in has been since (urban) the 1860’s.

  38. Steve Verdon says:

    Taxes paid as tariffs raise prices to consumers, but taxes on consumption do not?????

    Uhhhm, you are confused. I never implied anything of the kind.

    Our air, except, perhaps for China and India, is the cleanest in has been since (urban) the 1860’s.

    I guess it depends on the time frame you pick and the locale, now doesn’t it.