$5 gasoline?

16Feb06

Aren’t the best solutions usually the simplest solutions? It certainly is the case when it comes to gas prices and consumption.

Instead of the interminable debates about CAFE standards, hybrid engines, and ethanol, doesn’t it make more sense to simply raise taxes on gasoline? We understand there are political issues with this policy, but there are ways to make it palatable to the vast majority of Americans.

That is the argument of Robert H. Frank in the New York Times. The proposed plan is not a simple $2 a gallon gas tax. It includes a mechanism whereby taxpayers would receive a rebate via the payroll tax, making them, on average, breakeven.

Frank acknowledges there are political roadblocks to any sort of gas tax plan. The fact of the matter is that a wide swath of constituencies support just such a plan.

The gasoline tax-cum-rebate proposal enjoys extremely broad support. Liberals favor it. Environmentalists favor it. The conservative Nobel laureate Gary S. Becker has endorsed it, as has the antitax crusader Grover Norquist. President Bush’s former chief economist, N. Gregory Mankiw, has advanced it repeatedly.

By all accounts this sort of rise in gasoline prices would reduce demand for the product in the long and short runs. This would also provide an impetus for the development of other technologies, while making current supplies of petroleum last longer.

The big question is why isn’t this policy at least discussed?

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5 Responses to “$5 gasoline?”

  1. 1 derrick

    I’m all for it! Raise the price of gas and let the magic of the market take care of the rest.

    Let’s all blog it do to death and see if it gets some traction!

    Thomas H. Frank is one of my favorite economists.

  2. 2 Jay Walker

    You have to be realistic, as I think most politicians are – every suburban soccer mom and SUV driving dad – powerful constituencies in their own right – would riot at $5 gas, if $2 was a known tax.

    Won’t happen until they invent Hurricane Six category and it wipes out the Gulf Coast several times.

  3. 3 John Bruno

    I think that this would have a dramatic effect on everyone’s use of energy because it would make them hyper aware of their fuel usage without the economic hardship. If we set a goal to reduce our consumption by 10%. Then calculate how much fuel that relates to for each driver and then give them a tax credit for $2.00 per gallon for that amount over the year off of their payroll tax or added to their social security check or whatever makes sense. If you met the goal it would be a wash. If you used less you could add to your income. People could still drive whatever they wanted. SUV’s are great family vehicles but too often they end up being one person commuter cars. This would encourage people to car pool or give economic insentive for that hybrid car you’ve been wanting. The soccer moms would be ok if they could see the offset coming in on a regular basis. I think I read on the department of transportation website that about 1/3 of a households use is for commuting to work and 1/2 is for personal errands. That sounds like my usage with 2 kids with alot of activities. If communities would develope safe environment for kids and bicycles maybe our kids could take resposibility for much of thei own transportation.
    $2.00 /gallon tax would be a minimum to get that “shock” factor that people nedd to change thei behavior or you just get the” boiled frog” effect.
    I have found that the hardest thing to do is to convince everyone that this is a workable plan. Whenever I have tried to promote this to friends or someone I’ve met at a party I find that most people are negative and they close their mind before you can even explain how it works. I think the biggest challange is to sell this to our 30 second soundbite society.
    The plan is very flexible, it could be a revenue neutral or a revenue generating. The revenue generated could be used for infrastucture to promote further energy efficiency. The fuel alotment could be based on each state’s use so no one could cry foul. Revenue could be allocated to the states to be used for conservation projects similar to the highway funding.
    And what about the guy driving his Hummer 2 hours to work by himself? He can hold his head up with pride knowing that he is helping us reach our goals.


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