Lower gas taxes? America needs just the opposite
By Steve Yetiv
Across the country, politicians and ordinary citizens want to lower taxes on gasoline to ease pain at the pump. This idea is tempting, but it is precisely wrong: There is no better time to raise the national gas tax of 18.4 cents per gallon than now, if done correctly. I have a plan.
Each day, the world uses about 84 million barrels of oil. The United States uses one-fourth of that, yet has one-twentieth of the world's population. Using oil worsens global warming, supports oil-rich autocrats, funds terrorism and makes America more inclined to be stuck in the Persian Gulf.
In fact, our oil addiction is costlier than most people know. According to the International Center for Technology Assessment, the real price of gasoline is $5.60 to $15.14 per gallon, when taking into account environmental, health, social and defense costs associated with protecting and using oil.
Studies show that gas taxes work better than anything else in reducing oil consumption and spurring innovation in alternative energies. Higher taxes encourage buyers to purchase more efficient vehicles and to drive less, and gas taxes produce positive effects much faster and more reliably than any other approaches for dealing with America's oil addiction, including ethanol, hydrogen power and coal gasification.
Moreover, entrepreneurs are much more likely to invest in alternative energy if they know that high gasoline prices will make their products, such as hybrid vehicles, more attractive to buyers. They will especially invest if they can count on gas prices remaining high for some period of time, which taxes can engineer.
The problem with gas taxes is obvious — most people and politicians hate them. So how can we raise them, given these political realities?
I call this approach the "offset plan." In this plan, federal taxes on gas would be offset by a similar tax reduction on other consumer goods. The public would not be hurt by the gas taxes, yet the incentive to save fuel and to invest in alternative energy would still be powerful.
Some opponents of gas taxes have argued that they disproportionately hurt poor people. That's true. They take up a larger part of a low-income person's budget. But in my plan, the poor would not be disadvantaged, because taxes on other goods would be lowered as an offset.
In this plan, gas would be held at about $4 per gallon — a rough price that, studies show, would start to seriously change our oil-guzzling culture as the public would drive less, buy more hybrids and conserve energy; automakers would produce many more hybrids; and businesses would make serious, long-term investments in alternatives to oil.
As this occurred, the price of gas would likely decrease, because demand for gas would be lower. After the country went through some detox, and consumer habits changed, it might be sensible to slowly lift the taxes on gasoline.
This concept could also be put in motion by individual states, ahead of any action at the federal level. Indeed, some states — notably, California — have moved in the direction of higher gasoline taxes.
In Europe, high gas taxes have prompted mass adoption of hybrid vehicles that get 30 to 55 miles per gallon. America should join Europe in this regard and, in the process, set an example for India and China as well. India and China will add significantly to the world's gas-guzzling problems as they continue to industrialize. China has more than four times America's population but one-thirtieth of its vehicles on the road — for now.
The future is ours to lose; answers are available. We can target oil using taxes without hurting the average consumer, and this can be a key piece of the solution to our nation's energy puzzle.
Steve Yetiv is a political science professor at Old Dominion University in Norfolk, Va.