Raising the Gas Tax

In today's New York Times, Gregg Easterbrook writes that Kerry was right to support a $0.50 per gallon gas tax ten years ago - and argues that he should support a $0.50 per gallon gas tax today. I'm all for raising the gas tax (but I have also only put about 3,000 miles on my car since December).

Easterbrook argues that with a gas tax ten years ago...

The S.U.V. and pickup-truck crazes would not have occurred, or at least these vehicles would be much less popular; highway deaths would have been fewer; and gasoline demands would be lower as would oil imports. To continue, the world price of oil would have been lower, since petroleum demand in the United States is the first factor in oil markets; greenhouse-gas emissions in this country would be lower; Persian Gulf oil states would have less influence on the global economy and less significance to American foreign policy; fewer dollars would have flowed to the oil sheiks; and the trade deficit balance for the United States would be smaller.

That's a good crop of positives.

He counters the argument that gas taxes just send money to DC and are regressive saying that...

But new gasoline taxes could be revenue-neutral — intended to discourage oil waste rather than fill government coffers, with other taxes cut as the pump tax rises. Ideally, proceeds from a revenue-neutral gasoline tax could be used to reduce income taxes and payroll taxes of the poor and lower middle class. Gasoline prices affect this group regressively.

Can someone clarify this for me? I have trouble with the idea that we can make something revenue-neutral and not regressive. I can not remember where the idea started but at some point I started thinking that the dollar values might not work in a way that helps the poor. If your taxes are low and you spend a good bit of your income on increased bus fair or gasoline, there could be a point where you would have to be paid by the government - that is, there could be a point where a tax break isn't enough to off set the increase in expenses. Does that ever happen?

How do you really make a tax revenue-neutral non-regressive?

Comments

[Tom]

Slate has a discussion of the recent articles by conservatives calling for an increase in the gas tax.

The article concludes with some political cold water.

It's the middle of campaign season. Among the people who could actually enact a new gas tax—the hard-core partisan Republicans who control Congress and the White House—any increase is strictly verboten. After all, higher gas taxes would have a comparatively small impact on the wealthy Democratic states whose residents use mass transit—like New York, New Jersey, Maryland, and Connecticut. And it would have a huge impact on low-income battleground states with wide-open spaces, like New Mexico and Nevada. Perhaps that's why Gregory Mankiw, chairman of President Bush's council of economic advisers, who, as Easterbrook noted, advocated a 50-cent-per-gallon increase back in 1999, has stowed that idea safely at the White House's intellectual coat check.

[Anup]

Yes, if you were already in the lowest tax bracket, then the government may actually have to pay you some money back to make the gas tax revenue neutral. I am not sure of this would be required though.
Contrary to what most people claim, gas prices are only a small part of owning and operating a car. Let us say that you drive 15000 miles per year in a car that gets 20 miles per gallon. So, you use about 750 gallons per year. At $1.5 per gallon, you spend about $1125 per year or a little less than 95 dollars per year. If the gas prices were to rise to $2 because of a 50 cent additional gas tax, you would pay $1500 per year or $125 per month. So, the additional cost is only about Thirty Dollars per month. I don't think that with this kind of numbers, the government would actually have to give you money back if it was already giving you tax credits, but even if it is required to, whats the big deal about it?

[Anup]

This is cool! The commentator also makes a passing reference to our favorite movie. Listen to it! Do you think the general public may be softening up to a gradual increase in gas taxes? Daydreaming?

[Chui]

The poor needs gas much more than the rich. They tend to live further away from their places of work and school. They have less voice in getting public transport funded to the low income areas. A gas tax without compensating the poor would be regressive.

If the intention of the gas tax is to curb SUV use, the tax gained should be used to reduce car registration fees on a per car basis. This was the small car owners would gain disporportionately. As for people and business who have legitimate uses for SUVs, a legislative requirement could be imposed such that the additional fuel tax would be rebatable through the tax system if the vehicle had permanent business markings and the owner was a registered business, and the vehicle was insured for commercial use.

[The AdSense Wizard]

Maybe improve public transportation FIRST would help. Most US cities simply suck when it comes to public mass transit

[philippines seo]

In raising the gas tax, it could lead to actual gas pump prices rising due to gas companies passing the increase to consumers.