An argument for raising the gas tax

A gas pump in Berkeley, Calif.

TEXT OF STORY

Scott Jagow: Yesterday, commentator Robert Reich gave his arguments against suspending the gasoline tax for the summer. Today, a different take from our Economics Correspondent Chris Farrell. He thinks we should raise the gas tax. Chris, it's very clear you are not running for office.


Chris Farrell: Ah, come on, Scott. Can't you see the bumper sticker. You're driving along the freeway in L.A. bumper-to-bumper traffic, and there it is: Raise the gas tax now. I mean, it's a great slogan.

Jagow: Yeah, if you don't want to get voted into office.

Farrell: I am not running for office. But I want to argue that if you want to send the right signal to the marketplace, to the market, you want to raise the gas tax over time to say $1. Not going to do it immediately, but raise it over a period of several years. And that will send an important signal to the market for research and development into alternative energy. And that is where the real change will come in our economy in an era that we worry about things such as global warming and energy independence.

Jagow: But aren't we reaching that point of changing behaviors without a gas tax? I mean, it's already $4 a gallon.

Farrell: Well, here's the thing. My sense is we have finally reached a point where behavior is starting to change, where people are conserving more. So, all a gas tax is going to do is going to say energy prices or gasoline prices are going to stay high. And therefore, the Silicon Valley entrepreneurs and research scientists they're all going to try and figure out ways to come up with cheaper energy, alternative energy, more efficient use of energy. So, it would really give a spur to that market.

Jagow: Yeah, but Chris, one of the main arguments against a gas tax is that it's regressive, and that low-income people would get socked with another dollar when they're already having trouble paying for gasoline. And some of them don't have a choice but to drive a car to work.

Farrell: Right, now we've got a debate on how regressive it is. But let's just say it is regressive and that is a problem. Well, what you do is cut other taxes. You can cut the tax rate for low-income workers on the income tax side or you could go and say, "You know what we're going to do is cut the social security tax," which is a real hit on low-income workers. They get a benefit when they retire, but while they're working, it's a real hit. So, there's a lot of things that you can do to adjust the tax code in other places so that you can protect your low-income workers.

Jagow: Well, Chris. I have to give you credit for your ambition and thinking outside of the box. I don't know if it's going to happen, but thanks anyway.

Farrell: Vote for me. And thanks a lot.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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