A Modest Geogreen Gas Tax Proposal ($5/gal gas)

We need a $3/gallon federal tax on gasoline. We can do it and make the tax a popular idea.

How? Give every citizen an equal check from the gas tax fund.

The average motorist uses 520 gallons of fuel per year. If we assume that in the first year the tax does not decrease the amount of fuel used (because people still have their old cars, etc), in the first year a $3/gallon tax collects $1560/motorist. Assume that there are 200 million motorists in America. This tax raises $312 billion in the first year. This money would then be redistributed to all Americans equally. Assuming 300 million Americans, this gives a rebate check of $1040/American.

This is a fair tax. The most serious criticism of a gas tax is that it is regressive. It hits those least able to pay — the poor — most. But a redistributed gas tax solves this problem. Further, most gas taxes hurt families because kids need to be driven places. In a redistributed gas tax, the larger the family the greater the rebate. A family of five, for instance, would have a gas tax rebate of $5,200/year.

The first years rebate checks could be given as the gas tax effect, so citizens feel the benefits of the tax immediately. It is a patriotic plan to prevent oil dictatorships from driving our policies, to save developing societies from the corruption of oil, and of course the air will be cleaner.

$3/gal gas tax now. The people will support it.

20 thoughts on “A Modest Geogreen Gas Tax Proposal ($5/gal gas)”

  1. An exciting part of it is how rebates to child-citizens could be handled. Imagine if a third was given to the parents immediately, a third was put in government bonds until the child was 18 (starting capital for adult life!), and a third was put into a Social Security/Thrift account. While weaning America off oil, we could create a generation of capitalists!

  2. I do not like this idea. It takes more that it give back and I think that we pay way too much taxes now. How and who will oversee this money, the government? They are already on record by their actions, that they are not trustworthy of proper use of the money they already receive. Why do we want to give them more to misuse?!!!

    I am apposed to any additional taxes and some that are already inplace. I would like to see the social security program privatized and put under the control of process that will prevent it being raided by the government to make their balance look good.

    It could be done and ever account would be invested and the interest would increase the value of the account. A management fee of a modest and proper percentage like 1% of each account per year would be more than enough. Any one who outlives their account would be supplimented by a general account the would be the left over amount of accounts the outlive the owners and their current spouse (legal husband or wife by marriage).

    This is my offering.

  3. As a welfare mom, I'm thinkin' about have a whole bunch more babies.

    Leon!

    Pump prices have been going up all month and demand for gasoline is highest it has ever been in the month of April. Sooooo – it's still too cheap.

    I think the oil companies should get the rebate. That way my stock continues to go up up up.

  4. Randy,

    Your idea is interesting, but my proposal really isn't designed to increase revenue. Indeed, I would prefer the government to immediately redistribute the money to the people in checks. The point is to shift consumption away from oil, not to do anything actually good with the money.

    sonofsamphm1c,

    I'm not sure if it would be politically or economically feasible to pay oil companies not to sell gas, in the manner we pay farmers not to farm, but it may be worth looking into.

  5. i am doing a report for my high school business class about why five dollar a gallon gas is good.
    This report is due on October 19, 2007. If anyone would help me out with some ideas please email me at Clemsongirl340@aol.com
    thank you =]

  6. One big reason it would be good: I own a ton of oil stocks, and I'm a greedy liberal capitalist piggy.

    The products that are made from crude oil are ubiquitous, so it is not just gasoline. If you are talking about a barrel price that would result in $5.00 gas at the pump, that is one thing as it would also raise the prices of those ubiquitous things (plastics, fertilizers, medicines, artificial sweeteners, etc.), but if you are talking about an additional gasoline tax, that is another.

    A barrel price that high was once considered a lock to cause rampant inflation. But so what, so was a barrel price sufficient to cause $2.75 gas at the pump.

    In my opinion, and it's been my opinion for a few decades, oil prices have been way way too low to have a rational economy. We've done all sorts of stupid things as a result. For starts, $5.00 gas might cause clearer thinking. For instances, total morons might stop buying houses more than a 1/2 hour from work; instead, they might have bought a house a few minutes from work – like me. But to be honest, most people thought $3.00 gas would cause rational thinking, and it hasn't happened. My speculation is the price of gas will not make dummies get smart until it's around $10.00 a gallon; or worse yet, it may never make dummies smarter.

    American business will probably never believe this until they see the turds floating in their bath water, but the only significant benefit to them that might accrue from $5.00/or higher gas is the possible reduction of carbon put into the atmosphere because of conservation.

    My stock would plummet.

    But I'm resigned to getting richer as things get worse. For every American who might choose conservation, there's a new Chinese billionaire with ten new cars.

  7. Your thinking lacks one important detail. People must still work and for a large percentage of the country, particularly in rural areas, that entails driving to and from work. As fuel prices at the pump continue to go up, Average Joe and Judy must still pay that price to make money to pay bills and, pay for gas to get to work.

    There is a vicious circle begining already that has already begun. At what point does the cost of having a job outweigh having the job in the first place? I'd like to see a report on that! When it begins to cost you more each week than you can make just to keep the job or career, choices have to be made. Adding yet another tax (and I'd like to see where it is stil only $2.87 per gallon as WI is $3.05 or more thanks to taxes) will make it even tougher for families tryining to survive from paycheck to paycheck. Giving them a rebate check at the end of the year is not the answer. Besides, with prices that high, they won't be able to afford anything else either as those same higher prices will affect the prices of everything else.

    It would seem that as the country's Social Security system continues to crumble, those with interests in oil have made sure they are well taken care of for generations. Unfortunately at the expense of others.

    Paul

  8. Paul,

    “Your thinking lacks one important detail. People must still work and for a large percentage of the country, particularly in rural areas, that entails driving to and from work. As fuel prices at the pump continue to go up, Average Joe and Judy must still pay that price to make money to pay bills and, pay for gas to get to work.”

    An excellent point. Rephrased, you ask if a strategy to lessen America's dependence on foreign oil would naturally move economic activity away from petroleum-intense activities.

    The answer is yes.

    Re: sonofsamphm1c's comments, the carbon in the atmosphere probably doesn't matter much, but of course increased R&D in alternative energy delivery mechanisms for transportation should be spent, as well.

  9. There are a couple of things wrong with your plan. One of which is that it would tend to shift demand from gasoline to diesel which would not do much for the total demand for oil imports. Another problem is that it is simply not politically feasible to raise gasoline prices by taxes at the same time that people are experiencing significant pain from market driven price increases.

    Here's my modest proposal: We should have a NAFTA oil import tax. For starters add a $1.00 tax to every barrel of oil imported from a non NAFTA nation into any NAFTA nation. Since we import the overwhelming majority of our oil from Canada and Mexico, the immediate economic effects will not be too noticable.

    In order to make this tax more politically palatable, the revenue from the tax should be used to defray the cost of citizens from other NAFTA countries in the country where the tax is collected. In the US, hospitals, school districts, prisons and welfare departments would all get some money from this tax. Mexico and Canada are likely to support the tax because their oil will now be worth a dollar more in the US than the world oil price.

    Oil produced in Russia, Venezuala and the Middle East will also be worth a dollar a barrel less in the US than Mexican or Canadian oil. Once there is a political constituancy for NAFTA oil tax revenue, there will also be a political constituancy for raising that tax.

    Probably the most important effect that a NAFTA oil tax produces is reducing the uncertainty premium that markets build into the price of oil. If all the places where oil is produced were as politically stable as Canada or Mexico, the market price of oil would probably be less than $50 a barrel.

    The risk that political stability might break out in the oil producing areas of the world is the main impediment to investment in alternate fuels in the US and Canada. The people in charge at the oil companies remember the 1990s when the price of oil went down below $10 a barrel and lots of their friends and coworkers wound up with new careers selling cars and real estate. If you are an executive who signs off on a plant to make gasoline from oil sands (for a cost of $32 a barrel) when oil is $90 a barrel and during the two years that it takes to build the plant the price of oil drops to $31 a barrel, you are also going to be looking for a new career. A NAFTA oil import tax removes some of the world instability risk from the long term planning.

  10. Mark,

    Good point on substitution of diesel for gas — I would see a similar tax put on both petroleum products

    I would be worried that a NAFTA oil plan would artificially divert Mexico's economy even further toward natural resource exploitation, and that government programs should be funded out of general revenue on principle.

  11. If I worried too much about the intellectual purity of things like funding government programs out of general revenue I would still be registered in the Libertarian Party.

    The problem with your proposal is that it is too much like eating your liver because it is good for you. Maybe so, but nobody really wants to do it and it can be stopped too easily in Congress.

    By targeting the revenues, you create a constituency who sees dollar signs rather than hair shirts. It is still a struggle in Congress but you will have a bunch of Congressmen and Senators who will fight for it from simple self interest.

    As for Mexico, I wish them well. President Calderon has an enormous task trying to deal with 70 years of PRI misgoverning and malfeasance. Mexico's main problem is not with any incentives that can come from the United States. It comes from the ability of politically connected people to take stuff away from people without connections so that it is more important to maintain political relationships than to create wealth. If private property was given more respect in Mexico, that place would get a lot richer pretty quick.

  12. I’m not for redistribution of the money, but I’m not against the tax of gas. I’d like to see the tax only effect fuel imported though, but coupled with using the money for developing domestic energy sources and leveraging the extra money to turn the military into a more green organization. The military is a gas pig that needs the investment long term to truly go green.

    Call it the GWOT tax. At least then the American people would finally be involved in the war, and we would hit the source of income for the people who promote the conditions that create the war. They would be forced to balance their economies, which is something our need for oil allows them to avoid right now.

    It would also force China to protect the lines of communication in the Middle East, allowing us to draw down forces not only on the ground, but at sea.

    My thoughts.

  13. Galrahn,

    Clever idea to develop domestic energy sources.

    What is the wisdom of targeting the military for energy-efficiency improvements?

    How does abandoning our Leviathan function help China?

  14. The rebate should not be per person but per Vehicle or we be subsiding larger family’s as most of the driving with kids simply replaces were you would drive with out them

  15. David,

    Excellent consideration of second-order effects?

    Given the choice between subsidizing an increase in the population and subsidizing vehicle sales, I would favor the former, but you present an excellent warning that things are not always as straight-forward as they seem!

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