Tag Archives: net-zero gas tax

The Net-Zero Gas Tax

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!