Tuesday, November 27, 2007

T. Gift does it again!

Nice work Tom. Here is a short piece on the merits of a gas tax.


Trevor said...

I think this is a great piece, and would love to forward it to Libby Dole and Richie Burr. As much sense as it makes on paper, I just find it hard to believe that such a tax would ever be implemented. We're talking about the same nation that refuses to raise CAFE standards, to jack up the already record-high price of gasoline. I do like the idea of trying to set a price for carbon emmission externalities, yet I find it hard to believe that the tax would be directed to offset such emmissions. With over $9 trillion national debt, and a $288 billion farm bill on the table in the senate, I don't think Gift's example of $100 billion revenue from the gas tax would go very far in the federal budget.

Raise taxes on alcohol, because it's always happy hour somewhere.

Anonymous said...

Very interesting piece. I never thought of the increase in gas tax reducing our income tax revenue. I think that would be an excellent idea. The only problem is people hear tax and they are automatically against it, no matter what good it might do for the environment or the economy. It all circles around money and people here in America are used to getting what they think they deserve, mainly because we have been spoiled in the past. Increasing gas tax would make it harder on lower income earning families but these are the times when we can think of alternatives: public transportation, carpooling. It would also hurt businesses but the businesses have done this to themselves. They have taken advantage of the fuels they use and now they are having to do something about it, simple as that. As much as I cringe when I see high gas prices I still wouldn't mind them going higher because I know the reasons behind it. In addition over in Europe gas prices are sky high and if you go over there and notice most people don't own a car. That would work for me. I also agree with trevor on raising taxes on alcohol, it is a want that everyone seems to see as a necessity. Then they "shouldn't drive" so they won't have to worry about high gas prices!

Anonymous said...

The important issue here is public support. No representative is going to be the one to stick his neck out and support a gas tax until the public sees it as a good thing. There has to be a change in public opinion, so that when they see gas for 4.00 at the pump they think "getting this gas is going to be good for..." instead of "man this is hurting my wallet."

-Grant R.

EconAlum said...

I love these posts. Thanks!

There is another impact beyond the cost of individuals filling up at the pump. Nearly everything we touch, from food staples to consumer purchases to medial supplies, etc., spends a significant amount of time on the bed of a truck. Any increase in fuel costs will increase the cost of distribution in the US by a fairly significant margin. Even in a competitive free market, the full amount of that increase (in addition to an incremental margin – after all the truck driver needs to make a spread) will be passed directly on to consumers, resulting in significant inflation, which will likely only further exacerbate our current slowing economy, leaving us in a stagflationary environment.

So, even if you don’t own a car, be prepared to pay $5 for a gallon of milk and/or explain to lower- and middle-class families, whose diminishing purchase power will quickly fall below the poverty line even if their wages stay above it (though, their wages will likely decrease as unemployment increases), that we're all better off. I don’t think the tax is a bad idea (after all, we should tax behavior we want to restrict… like carbon emissions), but there are serious consequences in this case for a lot of people who are barely scraping by in our stalling economy.

As I understand it (thanks to NPR), we made the choice after WWII to invest in an inter-state highway system rather than a nation rail system as our primary means of travel and distribution how easily a rail-based transportation and distribution system could be crippled in a war (part of reason we defeated Germany). Now we're dealing with the consequences of that decision... as we've essentially tied our hands when it comes to carbon emission policy.

Anonymous said...

When thinking of the gas tax, I believe the idea of fairness is huge. A gas tax is a better reflection of the total costs that gasoline consumption incurs. Gift is making the point once again about the one concept that we should at least be able to grasp by the end of the semester. MSC > MPC. In fairness to society, a gas tax is the way to go.

Bobby Thomas said...

I think that this article is very true, and that the issue is very important that being a gas tax. The hard thing to do is to make all the citizens of the U.S. believe that. With the debate around the corner, I feel as if the candidates are going to discuss reducing the price of gasoline as opposed to raising it. We need some way to get off the dependence of gasoline and I think this would be a good start.

Sean said...

I think that the gas tax is a great idea, because it will reflect the true cost of using automobiles for our primary mode of transportation. Also, the money collected from the tax would help to improve infrastructure in the U.S.

A viable system of public transportation is needed. If interested look at the California High Speed train on youtube. It's really interesting and the video discusses infrastructure improvement which could be made to improve productivity in our country. Remember increased national productivity means a stronger dollar (i.e. more trips to Europe).

benj fuller said...

Europe is a different country. It is smaller than the US. Can yall take vacation with no car. Summer vacation in a local hotel. YAEH! This country is based on the car. Think about how many people (like me) live in rule areas and need to drive at least 15 minutes to get to any form of civilization. You can say I should live in a city and not need a car but I could tell you to cut off one of your hands cause that is how much I would like living in a city the rest of my life. If you were not raised in the country you wouldn't understand.
Regardless, Trevor is right that this would never fly. Not only because of stubborn southerners like me but because the politicians don't have the grit to stand behind it. People would never vote for a tax raising politician if anyone (including Satan himself) ran against him not raising it. The power of the almighty dollar means this could not fly.

sharpej said...

I believe that implementing a gas tax in larger cities, where public transportation is a viable option would indeed be a wise thing to do, since larger cities already have polution issues due to the high concentrations of vehichles. Hence, if you live in a suburb where your commute to work is threw the countryside with no public transportation, a vehichle is very important.i.e. site specific gas tax

Sean said...

Europe isnt a country and I grew up in rural America, also. It is due to my childhood that I have a close connection with rural America and the environment. That is why I believe that it should be preserved so that furture generations can benefit from the experience of being surrounded by nature.

Powell said...

This is a cool piece. It seems like enacting a gas tax would really help make things "fair". This tax would actually cause drivers to experience the external costs of driving their cars. Hopefully it would help change public behavior and people would use less gas. Sounds nice on paper...

Adam said...

since none of your students are dissenting, allow me Prof Casey to play devil's advocate.

Would raising the gas tax increase revenue for transportation and infrastructure projects? Probably, yes.

However a recent commission, National Surface Transportation Policy and Revenue Study Commission, just released their report, and I believe they have a better idea of how to move forward with the gas tax and transportation and infrastructure funding in general

Prices for gasoline are already skyrocketing because of foreign and domestic issues. Therefore, with the rise of prices associated with one product increasing (gas guzzlers) the demand for an alternative would increase, in this case being hybrids.

Everyone knows hybrids consume less gasoline. And if more hybrids are bought as a result of higher gas prices, then the revenue from the gas tax will not be as high as expected or projected.

Now the transportation commission suggested raising the gas tax in the short term as a way to fund the critically funded transportation infrastructure (which is the official goal of the gas tax, and then switching to a "vehicle miles traveled" tax in the long term to ensure sustained funding.

In addition, Congress recently passed and Bush signed energy legislation that would raise the fuel efficiency standards for cars and light trucks by 10 mpg by 2030. Now, I understand that there might be a formula to figure out what the fuel economy would be for hybrids, but I still the overwhelming belief of Americans would be that hybrids provide the better deal.

For all of these reasons, I believe that creating a permanent rise in the gas tax would not make much sense, as people are already planning to consume less gasoline, the same way as a rise in the cigarette tax would not create as much revenue as people would think because everyone is quitting due to the associated health risks.

A VMT would be a fair and balanced tax that could help improve roads, highways, and other transportation endeavors that would help reduce congestion, pollution, and other problems. What would be interesting to see is the elasticity between gas prices and hybrids, especially since it could totally disprove my argument. Does anyone know of any studies that look into this?

-Adam Kowalsky W&L ‘07

p.s. i tried making the commission name a link to their report, so in case that doesn't work, here is the direct address