## Thursday, 4 September 2008

### Solve the fuel crisis, Raise Federal Gas Taxes???

Ok, Greg Mankiw is a Harvard Economics prof, so he ought to know what he's doing; but I was reading one of his old blogs (2006) and he had the audacity to suggest raising the Federal Gas Tax by $1.00 a gallon...Yikes, how do you feel about$5.00 a gallon oil?

I'm an open minded guy, I decided to read the whole thing before I decided the guy is some ivory-tower cuckoo slightly out of touch with reality... and he made some good points
"The environment. The burning of gasoline emits several pollutants. These include carbon dioxide, a cause of global warming. Higher gasoline taxes, perhaps as part of a broader carbon tax, would be the most direct and least invasive policy to address environmental concerns.
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"Road congestion. 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. A higher gas tax would give all of us the incentive to do just that, reducing congestion on streets and highways.
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"Regulatory relief. Congress has tried to reduce energy dependence with corporate average fuel economy standards. These CAFE rules are heavy-handed government regulations replete with unintended consequences: They are partly responsible for the growth of SUVs, because light trucks have laxer standards than cars. In addition, by making the car fleet more fuel-efficient, the regulations encourage people to drive more, offsetting some of the conservation benefits and exacerbating road congestion. A higher gas tax would accomplish everything CAFE standards do, but without the adverse side effects.
" OK, he makes especially good sense to me here...
"The budget. Everyone who has studied the numbers knows that the federal budget is on an unsustainable path. When baby-boomers retire and become eligible for Social Security and Medicare, either benefits for the elderly will have to be cut or taxes raised. The most likely political compromise will include some of each. A $1 per gallon hike in gas tax would bring in$100 billion a year in government revenue and make a dent in the looming fiscal gap."... Ok, and I'm for 75 cents to reduce the debt and 25 cents directly to research in alternative fuel vehicles (or maybe tax breaks for those who use alternative fuel vehicles)...
"Tax incidence. 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" Translation, Even with a dollar tax added, the price won't go up a dollar total because of supply-demand pressures.
"Economic growth. Public finance experts have long preached that consumption taxes are better than income taxes for long-run economic growth, because income taxes discourage saving and investment. Gas is a component of consumption. An increased reliance on gas taxes over income taxes would make the tax code more favorable to growth. It would also encourage firms to devote more R&D spending to the search for gasoline substitutes."
Then there is the national security issue..... "Alan Greenspan called for higher gas taxes recently. "It's a national security issue," he said. It is hard to judge how much high oil consumption drives U.S. involvement in Middle Eastern politics. But Mr. Greenspan may well be right that the gas tax is an economic policy with positive spillovers to foreign affairs."...

So come on people, pick up those phones and call your congressman/woman.. and tell them if they don't get off their butts and raise taxes, your gonna vote 'em out of there.... bet that one will wind their clocks a bit!