I have been pushing it for years, and I am glad a bipartisan consensus is now emerging around it: we need a net-zero gas tax.
Charles Krauthammer writes:
What to do? Something radically new. A net-zero gas tax. Not a freestanding gas tax but a swap that couples the tax with an equal payroll tax reduction. A two-part solution that yields the government no net increase in revenue and, more importantly–that is
why this proposal is different from others–immediately renders the average gasoline consumer financially whole.
Here is how it works. The simultaneous enactment of two measures: A $1 increase in the federal gasoline tax–together with an immediate $14 a week reduction of the FICA tax. Indeed, that reduction in payroll tax should go into effect the preceding week, so that the upside of the swap (the cash from the payroll tax rebate) is in hand even before the downside (the tax) kicks in.
The math is simple. The average American buys roughly 14 gallons of gasoline a week. The $1 gas tax takes $14 out of his pocket. The reduction in payroll tax puts it right back. The average driver comes out even, and the government makes nothing on the transaction. (There are, of course, more drivers than workers–203 million vs. 163 million. The 10 million unemployed would receive the extra $14 in their unemployment insurance checks. And the elderly who drive–there are 30 million licensed drivers over 65–would receive it with their Social Security payments.)
My proposal, by contrast, was a $3.00/gal gas tax, equiavelnt to a rebate of $42 every period. The specific mechanics of the net-zero gas, whether rebated through the payroll tax or as monthly checks, do not matter much. What matters is that it helps our friends and hurts our enemies:
We underestimate our power. Of course, the slump in China and other rapidly growing economies has contributed to the current extreme price collapse. But China consumes only 9 percent of the world’s oil. The United States consumes 24 percent. On the other hand, Saudi Arabia produces 13 percent of the world’s oil. We don’t generally see ourselves as the Saudi Arabia of oil consumers, but we are. The Saudis have the most effect on the world price because they are the swing producer. We are, in effect, the swing consumer. And since oil peaked earlier this year, we are consuming less. October was yet another month of record year-on-year decline of gasoline consumption in the United States. And that’s just the immediate effect, before the long-term impact of changes in our automobile fleet can take hold. And that long-term change will only occur if we keep the domestic price high.
Let’s hope Barack Obama introduces this geogreen net-zero gas tax, along with a geogreen economic stimulus!
Amateur Economist calls it “ignorance, arrogance, and socialism.” Crush Liberalism is profane. The heritage foundation is simply sarcastic. But is Obama’s plan to tax oil companies to provide a second round of “rebate” checks reasonable?
Think back to April 2005: oil was approximately $50/barrel, and I suggested a tax to raise the average price of gas to $5/gallon. Along with this I wanted to rebate the proceeds to the population on a per capita basis, so those that used less gas would actually profit from the gas tax.
The world ignored me, gas prices shot up to more than $4/gallon anyway. This has similar “demand destruction” consequences as my plan, but instead of Americans receiving monthly rebate checks, people who happen to have oil to sell (including the oil companies, but mainly including thugs such as Vladimir Putin, Hugo Chavez, King Abdullah, and so on).
Obama’s plan works like an attemp to half-implement my plan, doing nothing to prevent the massive transfer of wealth from the Core to natural resource providers, while rolling back the relatively negligible transfer of wealth from consumers to oil companies. Obama’s plan does not address the real issues. But that does not mean it is terrible.
The record oil company profits exist because the government failed to implement my plan earlier. Consumers feel squeeze because the government failed to implement my plan. Both Obama and McCain invision making things a little better, but ultimately Obama’s tax-and-spend approach is marginally superior to McCain’s gas-tax-holiday, merely because Obama’s plan continues to keep the price at the pump high and rewards Americans for not using gasoline.
I like South Dakota Politics, a lot, but after checking the blog on my reader I find two posts to especially disagree with.
- SDP criticizes liberals for backing higher gas prices
But as I wrote:
It makes no sense to import vast amounts of oil from unstable petrokleptocracies. Oil revenues allow corrupt elites to avoid real reform and buy-off (often dangerous) special interests. It diverts capital from New Core growth economies to these backwords pits. It helps funds Islamic terrorism. It exposes us to another oil shock.
- SDP says that Congress is less popular than the President
But as I wrote:
The reason: the American people are opposed to Congress as an institution, but are not so opposed to the President. Political science research (see, for instance, Congress as Public Enemy or Stealth Democracy) shows that Americans are opposed to the idea of a body that is dedicated to political compromise making decisions for us. We would rather our government be in the hands of experts, or people who are able to ignore politics and get things done.
Increase gas prices. Ignore Congress’s job approval.
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.