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Why not tax gas while it's cheaper?
Allan Sloan is a senior editor-at-large at Fortune
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TEXT OF INTERVIEW
Scott Jagow: I filled up my gas tank yesterday, and when the pump stopped, I thought there was a mistake. It was so cheap. The national average is now $2.10 and 16 states have gas under $2. But my friend Allan Sloan says now is the time for a gas tax.
Allan, what are you thinking? Why should we tack on a tax now?
Allan Sloan: Because if we're gonna get people to buy fuel-efficient or alternate energy cars, you don't do it when gas prices start at $2, run up to $4, and by the time, say, General Motors, if any of this happens in Washington, comes out with this magic green vehicle the government's going to offer to make, it may well be that no one's gonna want to buy them again.
Jagow: Do you really think that people will go back to their gas-guzzling ways considering what else is going on in this economy?
Sloan: Yeah, I think they will. And the reason I think that is I remember -- I'm so old, Scott, I remember '73, '74, when oil went from I think $2 a barrel to like $20 or $30, and everyone said it was the end of the world and we've learned something from it. And everything reverted as soon as oil prices went down. And it's gonna happen here, too. People will absolutely go back to their gas-guzzling ways if the price of gas stays at $2 or goes even lower -- of course they will. And we'll be at the mercy of events all over again, and I don't think that's any way to run a country.
Jagow: And what happens if oil and gas go back to the levels they were in July, and then the tax is added on top of that?
Sloan: If you do it now . . . let's say the average price of gas is $2.20 nationally, it's something like that, let say you make it $3.25. People survived more or less at $4, and if there's a problem caused by this, you know for people who can't pay, you'll give them their gas tanks back in some form or other, I'd rather we pay this tax to ourselves than we pay it to Saudi Arabia or Russia or Venezuela.
Jagow: And how do you think this would benefit -- if it would -- the American car makers?
Sloan: Well, if these companies are still alive, and we got rid of these what I consider idiotic rules about average fuel economy, where we mandate that the average mileage of the audio fleet has to be this or that, and then we say SUVs are really trucks so they're not included -- if you're running a U.S. car company, you go mad with this. If you say, here's the market, go serve it, that's a lot easier, let these guys make the cause they think they can sell. And if there are high . . . if gasoline prices are high enough, the socially-conscious among us will be happy, the consumers will buy this -- it's a lot better than being at the mercy of events, which is what our energy policy has consisted of.
Jagow: An interesting topic, Allan. Thanks for your input. Allan Sloan from Fortune Magazine.
Sloan: My pleasure.
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In Michigan, state fuel taxes were shifted to expand freeways and roads by forcing public bus service reductions. This does not justify a gas tax increase. Type savethefueltax in google to see website about this and why we need to defeat transportation tax increases unless public bus service is restored in southeast Michigan
Why aren't we driving cars with 20% better mileage like the Europeans? Because the US taxes gas at less than HALF the rate of Europe. Americans just don't want to hear that paying more for gas will be better for our children and grandchildren--we want our two-ton trucks to buy a gallon of milk, and we WILL continue doing so unless there's consistent pain at the pump. Period. Ask any economist worth their salt: they all agree that markets operate most efficiently when you pay the TRUE cost of products, and by anyone's estimate, we are not paying the full cost of gasoline. Driving a car necessitates road and bridge repairs, an inflated defense budget and soldiers' lives, and the current tax isn't cutting it. So we should pay for that at the pump, not by closing down schools and paying teachers less than a Wal Mart manager. Where do you think the money to maintain our car infrastructure is coming from (aside from borrowing from China)? Lots of different places, both locally and federally, but I guarantee that the burden is falling disproportionally on the quality of life of the lower and middle class.
We need a gradually increasing gas tax (oops, call it a road/environment/battleship user fee) so we don't dump this problem AGAIN on future generations. Google and read an old Fortune article, "Why $3-a-gallon gas is good for America." The conclusion is clear--the money can stay here or it can keep going to terrorist regimes. Our politicians need to educate the public and display some leadership, and we need to tell them to do so. (Either that, or start thinking of something to tell your grandkids when they ask you, "Why didn't we do something about this a long time ago?")
Yes to the gas tax, with a Michigan exception. All funding should be dedicated to developing a viable transit system within the Region of Detroit and other metropolitan areas before one highway can be widened. Tax me more but make sure that I have a viable alternative if I choose not to drive.
I wanted to respond to the question asked by David Wooddell of Washington, DC, (11/17/2008):
"I have to ask -- if the foreign auto makers can build dependable vehicles with high fuel mileage, why can't American automakers do the same?"
I think that was entirely Sloan's point - that Europe's high gas prices result in consumer demand for high mileage vehicles, and that the U.S. Congress' strategy of getting Detroit to build high mileage vehicles by using CAFE standards doesn't work when American's have been paying low gas prices - they have no reason to buy them and have opted for SUVs and other low-mileage vehicles.
Another comment on the note (By Michael Beneke-From Jefferson City, MO, 11/18/2008) about food banks being impacted because low income workers must choose between food and gas budgets - Sloan definitely indicated that low income people could see many refunded to them, or a reduction in payroll taxes, if gas prices rose again.
However, to follow the 'regressive argument' would mean gas must always be cheap so as not to hurt the poor. I don't think that's a good way to tackle poverty - and it conflicts with our environmental and energy policies.
A way to deal with this argument so it is compatible with environmental and energy goals would be to make the gas tax completely revenue neutral - a reduction in payroll taxes and tax credits for low income residents would help all low income people, not just those who drive!
A gradual increase on fuel taxes is appropriate as is federal excise taxes on tires for larger vehicles; as is a certain btu value for heating larger homes.
Increased taxes here is the only way to give permanent incentives to more efficiency and thus less dependence on the oil thugs of the world.
Yes, in a perfect world, GM, Ford, VW, and Toyota would make only the 50 mpg vehicles that they are capable of----GM already has a V6 that can make over 35 mpg in a 3700# car--but they advertise the SUVs instead. Why, because that's where the profits are.
Right now, in the short term, tax penalties for wastefulness are the only solution
Mr Sloan, thanks for your courage!
It took one special meal for me to realize how wrong Mr. Sloan is. Monday evening I attended a "Hunger Banquet." The Calloway County version of food bank gave a short presentation. The number of people who use her service has nearly tripled since 2000 (population increase less than 10%). She stated that many have to cut the food budget just to pay for gasoline to get to jobs. And she said this was happening at food banks all across the nation.
Gasoline is not an avoidable expense for most Americans. Although it will make a difference to what vehicle some will drive, there is a segment of our population that can't afford to buy a different vehicle and really can't afford the higher gas prices.
We don't have to increase the tax on gas today. Simply make it a 10% sales tax: Roughly no increase from average price today. However, if/when prices increase, taxes will go up accordingly. This will actually put downward pressure on external and speculative price pressures. I think a % sales tax on gasoline would actually dampen the fluctuations we are experiencing today.
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