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Tuesday, October 24, 2006

The case for a gas tax 


If the Democrats win control of the Congress, they have committed to raise our taxes. Or at least my taxes. Generally, I'd prefer that we cut non-defense spending and hack into entitlements, but if I didn't get that from the GOP there is no reason to expect it after the Democrats return to real power for the first time in this millenium.

There is, however, one tax that we should increase, and that is the gasoline tax. Greg Mankiw made the case as succinctly as it can be made a few days ago. Put it up gradually -- Mankiw proposes a dime a year for a decade -- and it will not hurt the economy nearly as much as it will help.

But for the fact that Democrats made high gasoline prices a political issue until they were no longer high, their usual constituencies should be very happy. The environmentalist, anti-development, anti-oil industry, anti-car culture crowd would be ecstatic, as would their many loyalists who just want the government to take a larger share of GDP. There is an added bonus, though. It is an opportunity for the Democrats to look tougher on national security than Republicans, right out of the box. Why? Because it is inevitable that the Saudis, Iranians, Venezuelans, and Sudanese will also pay part of that tax:

A basic principle of tax analysis--taught in most freshman economics courses--is that the burden of a tax is shared by consumer and producer. In this case, as a higher gas tax discouraged oil consumption, the price of oil would fall in world markets. As a result, the price of gas to consumers would rise by less than the increase in the tax. Some of the tax would in effect be paid by Saudi Arabia and Venezuela.

Read the whole thing, and also consider this: If the United States finally signalled world oil markets that it was willing to tax itself significantly to cut its petroleum consumption, would that let some of the air out of the price in and of itself? If that is possible, it might be that the foreign oil producers would pay for all of the first couple of increases.

In all likelihood, we will learn in 2007 whether the Democrats are as bereft of ideas as the Republicans. They could prove their political courage, legislative creativity, and seriousness on national security matters by enacting a significant and escalating federal gasoline tax and daring George W. Bush to cast a veto in defense of big oil and the House of Saud. Do you think they will?

34 Comments:

By Anonymous Anonymous, at Tue Oct 24, 09:01:00 AM:

didn't john kerry propose this about ten years ago?  

By Blogger ScurvyOaks, at Tue Oct 24, 10:07:00 AM:

Strange for a son of the oil patch to agree with you on this, but I couldn't agree more. What would be better yet (but certainly won't happen under the Dems) would be to couple this with drilling in ANWR and liberalizing the rules on offshore drilling. Bring down demand with the tax and increase domestic production at the same time.

I'm getting really tired of funding the worldwide spread of Al-Wahhab's version of Islam.  

By Blogger Steve, at Tue Oct 24, 11:12:00 AM:

I especially enjoyed this line, "Every time I am stuck in traffic, I wish my fellow motorists would drive less, perhaps by living closer to where they work or by taking public transport."

"...burden of a tax is shared by consumer and producer." And the federal government goes about its merry way finding more ways to produce its fiscal gap.

"Public finance experts have long preached that consumption taxes are better than income taxes for long-run economic growth,..." Higher gas taxes will amount to taxing food as well as many other consumed necessities.

"Even after a $1 hike, the U.S. gas tax would still be less than half the level in, say, Great Britain,..." The level of 'democracy' in the U.K. and the rest of Western Europe is not that which I wish to emulate.

"...that while higher gas taxes are unattractive, the alternatives are even worse." Some are, maybe, but not all.  

By Blogger pacific_waters, at Tue Oct 24, 12:27:00 PM:

And just how would it help the economy? Whether or not the price of oil falls on the world market a rise in the pump price , whether caused by demand or taxes, is of dubious value.  

By Anonymous Anonymous, at Tue Oct 24, 01:09:00 PM:

Raising taxes to reduce consumption is fine in theory. In practice a lot of fuel expenditure is non-discretionary, ie travel to work, - we got to have X AMOUNT OF GALLONS PER WEEK TO EARN A CRUST. result - less disposable income.
In the real world OPEC and the hangers-on would increase the price of oil so that their revenues would be equal to or more than before. THEY WOULD NOT PAY PART OF THE TAX!!!!!!!!! WHY, - because they've got to have the Cadillacs, the Bentley, etc. Their foot soldiers live in poverty, and their anger is directed at the west by their hatefull religion, their god demands hatred.
Taxes, any taxes ACT AS A BRAKE ON ECONOMIC GROWTH. Study the LAFFER CURVE and its effects. Growth lowers inflation, helps with productivity increases, - all the things that ultimatly determine the STANDARD OF LIVING, or THE NET DIPOSABLE INCOME AFTER TAXES. DON'T EVER LET ANY FUCKING DEMOCRAT MORON TELL YOU DIFFERENT.
What should happen is that the oil producers should diversify their economies away from a total reliance on oil revenues. (More than 90% of Kuwaites are "employed" by the state)and enter the global trading community. Dubai, Bahrain are progressing quite well, Saudi is trying, but wants to use western money via the IPO route. Will that stop the export of the vile religion, and ergo, terrorists? I think not. It is mandated by their god, it is the reason for their existence.
The way to make the oil producers feel pressure in their purses is to
1)Become an oil producer ourselves, and these reserves are 8 times the reserves of Saudi Arabia
2)invest heavily in renewables. Photo-voltaic is about to go mainstream with a new "spray-on technology" using copper and selenium and a few others, which results in the same output per square area at 10% of the cost of traditional silicon photovoltaics. Fed government must legislate the tech infrastructure to allow the home owner/entrepreneur to feed the excess power produced BACK INTO THE GRID AND BE PAID FOR IT AT COMMERCIAL PRICES. Prices would be adjusted short-term to encourage uptake until critical mass is reached.
I favor small scale dispersed production nationally. Concentrated production, eg nuclear, presents vulnerability to increased terrorist activity caused by falling oil revenues in terrorist exporting states, and the costs of policing those facilities.
Multiplicity of nationally dispersed producers, non large enough to be debilitating in the event of knock-out. Bit like the internet, really, - which was designed with that in mind.  

By Anonymous Phrizz11, at Tue Oct 24, 02:04:00 PM:

There are a few bits of sense in Anon's post. One is the issue that a gas tax hike will hit poorer families disproportionately hard in the near term because of non-discretionary gas spending (e.g. commuting or buying groceries). How should the proponents of a gas tax hike address that issue? In the longer term, of course, the ensuing demand for fuel-efficient cars will solve this problem. But still I think that for the near term something is needed to ease the sting.

I don't agree that national distributed small-scale power production (via photo-voltaics or what have you) is the answer since electrical power demand peaks need to be met and they will be very spatially and temporally inhomogeneous. Since (like other commodities) power is cheaper to transmit in bulk, significant distribution problems would need to be addressed before anything like this becomes economically feasible. My guess is that we will need room-temperature superconductors (a technology that would require fundamental advances in condensed matter physics) for distributed power production to be viable, however I would love to be corrected by an expert.

Oh and remember, everyone, to take an example from the anonymous internet expert above:
ON THE INTARWEB, CAPITAL LETTERS ENHANCE CREDIBILITY. ESPECIALLY WHEN ARGUING AGAINST THOSE "FUCKING DEMOCRAT MORONS!"  

By Blogger DEC, at Tue Oct 24, 03:02:00 PM:

Forget taxes. The government needs to crush OPEC. The cabal of oil-producing countries have been creating problems and recessions in the West for about 30 years.  

By Anonymous Anonymous, at Tue Oct 24, 04:21:00 PM:

phrizz11, any politician proposing gas tax hikes, in a volatile situation such as exists, - iran troubles/threatened cut backs, nigerian/algerian rebels, al qaeda attacks on major Saudi oil installations, Russian chicanary just north of Japan and with European supplies and covert action to interrupt Baku-turkey-Israel supplies, to name a few, "HAS GOT TO BE A FUCKING MORON", whatever his political affiliations, similarly with anyone who fals to recognize that fact. The barrell price could easily jump to $100 at the slightest hint of anything remotely troublesome.
Strange that you would accept the proposition of a gas tax hike, and then seek to build a team of box tickers to administer rebates, or other measures etc, etc. which would in turn lead to more tax hikes to feed 'em.
Exactly where do you keep your brain???  

By Anonymous Anonymous, at Tue Oct 24, 04:38:00 PM:

dec, what you gonna do about it. I mean, Dubbya has got his hands full keeping hold of Iraq. He will not leave an oil rich nation to be gobbled up by madmen, whatever his advisors say to win the vote, but how to get there? saddam has a second wife, a high ranking Syrian. You didn't know? You do now!
He also has a son by that wife. You didn't know? You do now! The Dynasty survives, and will fire-up soon. Saudi is trying to sideline Asad and split the Syrian/Iran axis. In gaza hamas, soon to be disowned by syria if Saudi has his way, is fighting Fatah, for the honour of defeating Israel (as if).You really think anymore intervention in that powder-keg is gonna calm the world?
Oil at $200 per barrell would result from your idea together with massive global recession.
Exactly how you gonna crush OPEC, while keeping a semblance of stability??
Please tell  

By Anonymous tonto, at Tue Oct 24, 05:09:00 PM:

Ahem, now gentlemen, stay calm, I think this may be the answer, - The US should become an oil producer. The problem with these deposits are that they are "DIRTY" ie toxic to the environment, and are costly to extract. Global prices of less than $30 per barrell will render these deposits uneconomic to extract, even when extraction technologies are perfected. Still, it should make our Arab friends sit up and take notice.


The world's biggest oil reserve, which spans Colorado, Utah, and Wyoming and holds 8-times more oil than Saudi Arabia, 18-times more oil than Iraq, 22 times more oil than Iran.
When drilling begins, it could mean an end to Middle East oil dependency.
Al-Qaeda has declared war on Middle Eastern oil facilities.

In March, terrorists rammed three bomb-loaded cars through the front gates of Abqaiq, a gigantic Saudi Arabian oil facility.
This was the second attempt in as many months to destroy Saudi Arabia’s biggest oil refinery — with terrorists getting as close as 300 feet to the most sensitive areas.
A successful strike would have lifted oil prices to $150 a barrel for as long as a year.
Since then, the Juaymah storage tanks and the off shore rigs at Ras Tanura — both in Saudi Arabia’s Eastern province — have also narrowly avoided destruction.
In July the situation got even worse. The conflict between Israel and Hezbollah pushed oil prices to $78 per barrel — a record high!
Here in the United States, the message is clear: End dependency on foreign oil or suffer the consequences.
This is why last year a group of U.S. lawmakers unleashed a new plan: to finally unveil a secret U.S. government oil field and unlock the oil trapped inside.

Last August, the Energy Department delivered the full report:

This new reserve holds more than 2 TRILLION barrels of oil... Enough to meet our energy demands for the next 500 years, according to some estimates.

In other words, this reserve is so big it could put a stop to our foreign oil dependency and end oil worries forever.
The government is finalizing the details.
• “The gigantic untapped [oil] resources found in Utah, Colorado, and Wyoming are sufficient to meet our energy needs, while also contributing to the ever-increasing global demand for liquid fuels.” Utah Senator, Orrin Hatch

• Developing this new oil resource “could literally shake the world.”

-- Chairman of the Senate Committee on Energy and Natural Resources, Pete Domenici

• “We actually have some of the world’s largest potential oil resources within our borders. If my math is correct, we have 12 times as much oil as Saudi Arabia.” Energy and minerals subcommittee chairman Pete Domenici.  

By Anonymous eric the red, at Tue Oct 24, 05:15:00 PM:

For fucks sake, why aren't we extracting faster, and sinking the economies of the middle east crap cans?  

By Blogger Dan Trabue, at Tue Oct 24, 09:36:00 PM:

There's an awful lot of mistaken and irresponsible commentary happening here. Forgive me if I only tackle one, for now.

"we got to have X AMOUNT OF GALLONS PER WEEK TO EARN A CRUST."

And if gas prices go up? Double, triple what they are now? What will you do?

Why, live closer, drive less (or not at all), purchase more locally produced stuff. These are responsible actions to take, now. Tiger Hawk's entirely reasonable proposal (while maybe not drastic enough, but it's a starting point, anyway) may help us to live in a more responsible manner.

We'll be forced to decrease our usage eventually due to the fact that oil is a finite source with a growing demand and basic economics will tell you that a decreasing supply of a product with an increasing demand will raise prices.

Gas prices are artificially cheap, with "unpaid" costs being paid by the environment, by our children, by the elderly, young and sick. Personal responsibility dictates that we have some policies in place that push us towards living more responsibly.  

By Blogger Lanky_Bastard, at Tue Oct 24, 09:39:00 PM:

It might be good for the country, but it's a political dynamite.  

By Blogger DEC, at Tue Oct 24, 09:48:00 PM:

Don't forget the sweaters in winter, Dan. President Carter wanted everybody to wear sweaters, too.

Yawn.  

By Blogger DEC, at Tue Oct 24, 10:02:00 PM:

Not only is it political dynamite, Lanky, it will not work. The days of the Shakers and the Roycrofters are over. We live in a global economy. Americans aren't going enjoy living like the Amish. And the Chinese aren't going back to their rice paddies.  

By Anonymous Anonymous, at Tue Oct 24, 10:02:00 PM:

Good idea...slight modification -- charge a tariff on imported barrels of oil ($20-30/barrel), don't raise the tax on gas. That would (a) encourage domestic production, and (b) encourage massive importation of refined gasoline (drying up the supply for Iran, which may have oil, but doesn't have gas).

Short term -- lots of pain. The gov't could make it better by disbursing tariff revenues as a tax credit.
Also, short-term: relax the tariffs on imported ethanol, esp. from Brazil, and offer tax credits for hybrids and biodiesel/ethanol cars, medium-term: drill ANWR, OCS, etc. long-term, invest in non-petroleum-based energy sources. Hydrogen? Solar? Biodiesel? Coal? LNG? I don't care, but if it drives the price of oil down to $5/barrel, the Iranians (among others) will have to choose between (a) feeding their people, (b) sponsoring terrorism, and (c) building the bomb -- they won't have money for all three.

Spend the Islamofascists into oblivion the same way we broke the back of the Soviets.  

By Blogger DEC, at Tue Oct 24, 10:42:00 PM:

Two things that may have an impact on your strategy, Anonymous:

1. Petroleum has a lot of industrial applications beyond fuel.

2. If the West doesn't use the oil, the Chinese may drive bigger cars.  

By Blogger Dan Trabue, at Tue Oct 24, 11:00:00 PM:

"Don't forget the sweaters in winter, Dan. President Carter wanted everybody to wear sweaters, too.

Yawn."

Ahhh... The ol' "Stick My Head in the Sand and Ignore the Facts" approach to policy.

Y'all are probably correct in at least this much: Americans don't want to pay actual costs for gas and therefore our politicians can't/won't try to force the issue and we'll keep driving right up until the oil has reached $6/gallon ($10/gallon? $20?) and people are forced to change.

After all, it'll hurt the poorest nations hardest first. No skin off my back...  

By Blogger Dan Trabue, at Tue Oct 24, 11:02:00 PM:

"Americans aren't going enjoy living like the Amish."

You're right here, too, DEC. And not only are they not going to enjoy living like the Amish, we may prove unable to adapt and choose instead, just die off rather than grow our own food in a sustainable way.  

By Blogger DEC, at Tue Oct 24, 11:37:00 PM:

Dan said: "...we may prove unable to adapt..."

There never is a morning we wake up without options.

But "Carter defeatism" is not an option. Ask any veteran Democratic politician if he want to run on Carter's platform again.

You cannot throw any of the global economy's major economic engines into neutral. If you do, you will have hundreds of millions of starving Asians and Africans again. (And this time many of them will have an AK-47 and a college education.)

Meanwhile, the U.S. let in 12 million poor illegal immigrants. Now we hear complaints about the how the poor are going to drive their cars.

You could always send those 12 million people back home. That would reduce oil consumption in the U.S.  

By Blogger DEC, at Wed Oct 25, 12:20:00 AM:

Dan said: "After all, it'll hurt the poorest nations hardest first. No skin off my back..."

I employ more than 1,200 people in the poorest nations, Dan. What are you doing for them?  

By Blogger Lanky_Bastard, at Wed Oct 25, 12:37:00 AM:

Oh, I approach this from the argument that the primary benefit would be the more competitive market for alternative energy, not the reduced demand or the tax proceeds. Still a gas tax is pretty low on my energy wishlist. I'd rather the federal government to made good on it's old promises to have a federal repository for nuclear waste.  

By Blogger Dan Trabue, at Wed Oct 25, 06:43:00 AM:

"I employ more than 1,200 people in the poorest nations, Dan. What are you doing for them?"

Oh, I see. That explains something.

Well, to answer your question, I'm living in a more sustainable way than I used to. And am continuing my downwardly mobile path.

The thing is, we all need to live in a personally responsible way. If we're consuming enough that, were everyone to live like us it would take 7 planet earths to provide the "stuff", that is not sustainable. We are consuming too much.

So, what sort of labor are you paying for around the world, Dec?  

By Blogger Dan Trabue, at Wed Oct 25, 07:02:00 AM:

"There never is a morning we wake up without options."

Sure we have options. We daily choose to live in a way that is responsible or not. The question is: How do we best encourage responsible living?

To want to encourage sustainability is not "defeatism."

Suppose there were an island with enough resources to provide for 100 individuals. On this island, there lived 75 people. Suppose further that ten of those individuals were consuming at a rate that would deplete the island of its resources in a few years. To compensate, the other 65 consumed less.

Additionally, folk were reproducing at a rate that would push their numbers over 100 in a few years.

Tell me this: Is this a society that is living responsibly?

Now they may think, "well, sure we're consuming too much. But we'll likely come up with new crops and procedures to make up the difference." And, not being defeatists, they believe in that option - that their Genius will save them from plain mathematical facts.

Are they living responsibly then?

I'll say it again: We need to find ways and encourage policies that encourage personal responsibility on a global scale WITHOUT totalitarianism, without the few benefiting at the cost of the many or the environment or the future.

It's not responsible to bet our future on possible solutions that don't currently exist.  

By Anonymous Anonymous, at Wed Oct 25, 08:27:00 AM:

HEY PHRITZZ11 YOU FUCK-WIT
Oh so intelligent..
I've been doing some research. In the UK, households that generate more from photo-voltaic than they use, CAN PUMP IT INTO THE GRID AND GET PAID FOR IT.
There is software running little digeries that are wall-mounted that monitor and display the flow - real time. No modification to the infrastructure is needed.
As for YOUR techical suggestion, well, I now know where you keep your brains, - nowhere, 'cos there ain't any.  

By Anonymous Phrizz11, at Wed Oct 25, 09:06:00 AM:

^^ Haha, the above post is Internet gold! Gold I say!

Anyway, besides the impeccable style, it misses the point.

1) The existence of buyback programs does not imply their economic viability. Provide documentation that it is profitable (or at least break-even) for power companies to buy-back the power generated by consumers, without government incentives, and then you'll have a point about photo-voltaic power. Otherwise, such programs are not sustainable or scalable.

2) How do you efficiently get a distributed excess of power to a specific place where there is a spike in demand? This is a significant technical challenge that I do not believe can be solved with current technology. Unless you can provide documentation otherwise, it means that large power plants are not going anywhere fast.  

By Blogger DEC, at Wed Oct 25, 12:35:00 PM:

Dan: "To want to encourage sustainability is not 'defeatism.'"

I agree. I was not criticizing responsible living. I was criticizing the Carter mentality that "we all must reduce our expectations." In practice, the people whose expectations always get reduced are the poor, not the rich.

Dan, you and I have gone a couple of rounds before, so let me make something clear from my point of view. You are an idealist. The world needs idealists. They set the goals. But idealists focus so much on the big picture that they seldom achieve anything. I am a pragmatist (as are most successful businessmen). Whatever works best is fine with me.  

By Blogger Dan Trabue, at Wed Oct 25, 01:14:00 PM:

Thanks for reaching out but you should know I consider myself a pragmatist. I want to do what works in the real world. I try to organize my own life around this precept.

This notion (I'm not sure if this is what you were getting at, but others bring it up) that "even if we aren't living in a sustainable manner today, eventually human ingenuity will rescue us" is what I consider imprudent idealism. I agree humans are quite ingenious, but we are also entirely fallible. We can and do create messes that we can't dig ourselves out of. Frequently.

And so, my answers (that I consider both pragmatic and personally/societally responsible) include:
"Let's live in a way that is sustainable.
Let's pay for things as we go and not push them off on others.
Let's not take actions/create policy that we know is dangerous and/or unsustainable."

I'd have more faith in The Market IF the market relied upon Actual Costs. It doesn't. Instead, it encourages passing off costs to others as frequently as possible, because the bottom line is all that matters.

I prefer more pragmatic and responsible solutions.  

By Blogger DEC, at Wed Oct 25, 03:20:00 PM:

Look at these definitions of pragmatist and idealist, Dan. Which one are you? (I'm curious, not arguing.)

http://sern.ucalgary.ca/courses/seng/693/W98/alang/minor.html#Styles  

By Blogger Dan Trabue, at Wed Oct 25, 04:41:00 PM:

Tough choices. Of those possibilities, I felt the Idealist, the Pragmatist and the Synthesist best suited my personality. Of the Multiple Style choices, I most identified with the Idealist-Realist.

According to

http://quizfarm.com/test.php?q_id=23320

Which asks: What is your worldview (Cultural Creative, Idealist, Postmodernist, fundamentalist, romanticist, existentialist, modernist, materialist)

These were my results:

Cultural Creative 63%
Idealist 50%
Postmodernist 50%
Fundamentalist 44%
Romanticist 38%
Existentialist 31%
Modernist 31%
Materialist 13%

If you like that sort of test and place any stock whatsoever in them. (I don't, but find them interesting nonetheless.)  

By Blogger DEC, at Wed Oct 25, 04:49:00 PM:

Dan, thanks for taking the time to look and to respond.  

By Blogger GreenmanTim, at Wed Oct 25, 09:10:00 PM:

That's one of the things I like about Dan. He takes the time to engage in dialogue and apparently tries to consider new information offered on its merits. Not your average Troll, but then I suspect many of us here aren't.  

By Blogger DEC, at Thu Oct 26, 12:20:00 AM:

Yes, I like Dan, too, Greenmantim. Both of you make interesting contributions to this blog.  

By Anonymous BIRD OF PARIDISE, at Thu Oct 26, 10:44:00 AM:

Their promting gas tax here in calfornia to combat the so called global warming. I have a better idea how about a HOT AIR TAX to be imposed on all those who produce HOT AIR just by opening their big fat pieholes persons like AL GORE and all those from the various enviromentalists wacko groups especialy from GREENPEACE  

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