Sunday, November 16, 2008

A Worthy Tax

You don't hear me pushing for higher taxes very often. I try to avoid paying sales taxes (even though I know they help the state and local communities) by ordering online as much as possible. And federal taxes are on a lower rung of my ladder because of how many of those tax dollars are spent.

However, I would not be against a variable gas tax, especially if the proceeds were used not just for a bailout of the auto industry, but to remove the bloat in that industry and force them to start producing high-quality, fuel-efficient vehicles which would clearly be in demand if we knew gas was never going to cost less than $3.50 a gallon.

I've been an advocate of this idea since at least 1980 when I suggested we should add a $1.00 per gallon tax on top of what was then a $1.20 gallon of fuel for two reasons: reduced consumption to wean us from imported oil, and as a source of funding for alternative transportation methods and building more efficient cars.

Twenty-eight years later, here we are. Daniel Sperling and Deborah Gordon, writing in today's New York Times, have the right idea.

The best bailout is one that weans us off oil and sets us on a path to reduced carbon emissions. Congress and President-elect Barack Obama are not qualified to protect shareholders’ interests, nor can they build a better car. But they can ensure that society benefits from our investment in the automobile industry.

One way to do that would be to establish a price floor of $3.50 per gallon on gasoline. If the price drops below that, as it recently has, the federal government would impose a variable tax to bring the price up to $3.50. If the price goes above $3.50, then the tax disappears. The money raised by the variable tax would be used, at least in the short term, to provide loan guarantees to the auto companies. (To ease the burden of higher gasoline prices on low-income taxpayers, some of the revenue would be provided to them as tax credits or vouchers.)


At current prices, a floor of $3.50 per gallon would generate more than $17 billion in one month — a big chunk of a $25 billion bailout. If, without the floor, gasoline averaged $2.50 per gallon over the next year, revenues would amount to $140 billion. That money could pay for a sound transportation policy agenda beyond the bailout.

I think we have demonstrated we can live with a $3.50 gallon as most of us were paying more than that in late summer. It's a tight fit financially for those struggling, and there are ways to provide assistance to those people truly in need.

With prices at the pump currently hovering just above $2.00 per gallon it would be an ideal time to bite the bullet and make a genuine effort to get ourselves out of this mess.

Meanwhile, Chevrolet is planning to introduce the Volt in 2010.
The Volt, which the company plans to begin selling in November 2010, should easily double the fuel economy rating of today’s mileage hero, the Toyota Prius. The Prius, which carries a 46 m.p.g. rating in combined city and highway driving, is a conventional hybrid that uses modest amounts of electricity to minimize the fuel consumed by its gasoline engine.

The Volt takes the opposite approach, relying mainly on electric power, with its gasoline engine running only when needed to stretch the driving range. The 100 m.p.g. automobile, which once seemed an impossible dream, will become an official E.P.A.-rated reality with the Volt’s arrival.

It's a shame GM didn't roll this thing out in 2007. Had they done so, maybe a bailout wouldn't have been quite so urgent.

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