April 08, 2004
Gas Taxes—bad at any cost

In today's Seattle Times, Matt Miller's syndicated column belittle's America's opposition to gas taxes with a few swipes at the Bush administration, a few specious comparisons with the rest of the world, and a few points that have less to do with the politics of gas and more to do with the politics of eco-extremists. The column is not available on the Seattle Times server, so I went to Miller's site to link the article.

It may look as though the White House buckled, but anyone with a strategic eye can see that Condi Rice will finally tell the 9/11 commission the truth: Richard Clarke wanted higher gas taxes, President Bush rebuffed him, and now Clarke is bitter.

Miller is trying to be snarky, but it's just as good a reason as any to explain Clarke's about-face on the underlying causes of the 9/11 intelligence failure.

Welcome to the gas attacks. Prices are high and the blame game is on. Bush has a new ad saying that Kerry voted for a 50-cent gas tax. Kerry has punched back by producing a 1999 article by Bush's top economist calling for - you guessed it - the same nefarious 50-cent gas tax!

...Which Bush has made clear through his policies over the past three years would never be implemented, no matter how wonderful his advisors thought the idea. Whereas in a Kerry administration the idea would be quite likely, since a) Kerry himself proposed it, and b) the French have such a tax in place. Must have the French seal of approval, whether it is foreign or domestic policy.

Bush tops that with a "Kerry Gas Tax Calculator" on his Web site, through which I reckoned that my wife and I would be looking at an extra $260 a year. But that's far less than our family must owe thanks to Bush's Soaring National Debt Tax, for which I hope the Kerry site will soon offer a handy calculator, too.

Don't forget to calculate the higher income tax people in Miller's income range would incur under a Kerry administration. (Miller was raised in tony Greenwich, CT, and in addition to his law degree, his position at the Liberal Center for American Progress, his column, and his radio show, has a thriving consultancy business.)

There's no question higher gas taxes are unpopular. This is why the last time energy taxes were discussed, as part of Bill Clinton's 1993 deficit reduction plan, we ended up with only a 4.3-cent-a-gallon hike, and Bob Dole even made repealing that little levy an issue in his 1996 presidential campaign.

Energy taxes are fundamentally regressive; The CEO and his janitor pay the same cost per gallon, and the CEO is more likely to be able to afford a newer, more fuel-efficient (and less polluting) vehicle than his lowest-paid workers. I'm surprised that the liberals support such a tax, considering their love of soaking the rich with income taxes, and their denunciation of payroll and social security taxes for their regressive effects.

To the rest of the world, our price complaint must look a little silly. After all, even with recent spikes, gas prices are lower today in inflation-adjusted terms than they were decades ago. Thanks to these bargains, Americans slurp as much oil as ever. And despite perennial warnings about fickle foreign supplies, we imported 61 percent of the oil we consumed last year, up from 33 percent in 1975.

I agree with his sentiments on the actual price of gas, adjusted for inflation. However, the most effective way to reduce our dependence on foreign sources of oil is to exploit resources we have here in the US, such as Alaska's north slope (and the Arctic National Wildlife Refuge). However, the Democratics in congress, in thrall to the loony environmentalists, have consistently blocked such an action, which was a key feature in Bush's energy plan.

In France and Germany, a gallon of gas costs around $4; in Japan, about $3.50. Thanks in part to their policy of high-priced gas, our industrial competitors have made stunning strides in energy efficiency and independence. France now gets more than 70 percent of its electrical energy from nuclear power. In Japan, oil imports in 1980 were 5.5 percent of GDP; by decade's end, they'd fallen to 1 percent. The industrial restructuring that enabled this drop left Japan producing two and a half times its 1975 output with, in effect, the same tank of gas.

The reason France gets more than 70 percent of their electrical energy from nuclear power is because the government is building more of them; here in the US, because of the outrageously litigious anti-nuclear movement, it is impossible to build nuclear plants, and groups such as Robert Kennedy's Natural Resources Defense Council (and the related Riverkeepers) have tried to close major nuclear power plants. Japan's "economic miracle" of the 1980's has resulted in stagnating or declining quality of life in the last decade. In addition, Japan produces no petroleum of its own, unlike the US.

It's not that the United States has made no progress. Economy-wide energy efficiency is up by more than 40 percent since 1975. Average auto fuel efficiency has risen from 16 to 20.4 miles per gallon over the same period. Still, the average fuel economy of the new car fleet has fallen every year since 1986, from a high of 25.9 miles per gallon to about 23.8 today. And American drivers still consume about two times more gasoline per capita than people in other advanced countries.

One of the reasons Americans consume more gas per capita is the simple sheer size of our country, and the fact that many Americans must live far from work because of crowding or economics; the San Francisco Bay area is so opposed to development (or redevelopment) that people are commuting from Stockton and Tracy (70-80 miles) because they cannot afford the insane rents in the areas near to their jobs. In addition, because of the diffuse nature of our country, mass transit such as railways are impractical for travel, unlike the small European countries where such programs are rational.

Average fuel economy is dropping is because Americans have rejected small cars. Look at the small cars offered by Japanese auto companies; today's Honda Civic is far larger than the original 1975 Civic, and the Toyota Echo is larger than the small Toyotas of the 1970's. American automakers seldom found success with small cars; most of their small offerings have been slow sellers, and they make very little money on them even when sold at full price. When they are sold with rebates, the profit margin disappears entirely.

At roughly a billion dollars per penny in annual revenue, a 50-cent gas tax would help fund needed programs or needed deficit reduction. It would also substitute a market-based approach to auto efficiency for today's mixed signals, through which low prices urge consumers to buy SUVs, while mileage-minded regulators tell the big three to build compacts.

SUV's are not low-priced, as a quick check at your local dealer will reveal. They are selling well because they are practical, as well as currently fashionable. They combine the peace of mind of all-wheel drive with a good view of the road, and a flexible cargo or passenger hauling capacity. Short of government mandates banning or restricting their production, there is little chance of the public becoming disaffected by them. A steep gas tax would disproportionately affect US auto producers, who command a majority of the large SUV market, as well as the large sedan and full-size pickup markets. Closing down more auto plants in response to reduced demand is not a way to placate unions. Talk about exporting jobs overseas! At least the US corporations pay corporate tax on their full income, regardless of where their employees are located.

The chief (and valid) objection to higher gas taxes is that they fall most heavily on those with less income. But new wage subsidies for low-income workers, which also ought to be on the national agenda, can far more than offset this hit.

He addresses my earlier note here, but suggests wage subsidies, which alone would consume any additional revenue generated by a tax increase. It's just another form of income redistribution. In addition, once a tax is enacted, it is very difficult to eliminate it, as the left will scream about slashing services and "balancing the budget on the backs of the poor", even though the poor pay a far smaller proportion of taxes than their share of income.

In 1991, the Germans enacted with little fanfare a 50-cent gas tax to help rebuild the former East Germany. In 1993, Americans found four cents on top of $1.20 gas almost too much to bear, even while we bequeath our children dirtier air and the continued risk of war over oil. A decade later, it's time to have a grown-up conversation about using sensible energy taxes to achieve America's social, economic, environmental, energy and national security goals.

Hmmm, apples and oranges. The last time we had to rebuild a significant portion of our country was after the civil war. If we were to inherit a polluted, poverty-stricken, ramshackle mess like the former East Germany, I might reconsider supporting such a tax. Until Mexico agrees to become our 51st state, however, I'm opposed to the tax increase.

I must point out that I am opposed to such a tax even though I do not drive. I do not own a car, and in fact I have never had a license other than a learner's permit. Despite the fact that I would not be directly impacted by a gas tax, I think it's bad policy.

posted on April 08, 2004 09:22 PM


I'm not unalterably opposed to increasing the gas tax, but I'm definitely against using the proceeds for some nebulous social programs; gas taxes should be spent only on transportation-related issues - which, where I live, means "fixing these crappy roads and bridges."

posted by CGHill on April 10, 2004 07:26 AM

we do not need to increase the gas tax to fund transportation issues; we need to use the surplus tax we are already collecting on valid projects, rather than the ridiculous "demonstration projects" (translation=pork) that we waste millions on every year.

Former Rep. Bud Shuster (R-PA) amost managed to get a monorail built using gas tax money in downtown Altoona, PA (population 55,000); I think Citizens Against Government Waste was the group that squawked loud enough to get that project killed. The GOP has been particularly bad at using the DOT spending bill as a pork barrel, although the Democrats were not much better when they were in charge.

posted by timekeeper on April 10, 2004 11:53 AM

And what Shuster wound up getting was the absurd "Interstate 99", which never actually leaves Pennsylvania and doesn't do anything US 220 didn't do before except cost a whole lot more.

It would be nice to put the kibosh on this sort of thing - after they finish the new Crosstown in downtown Oklahoma City, of course. :)

posted by CGHill on April 11, 2004 07:37 AM

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