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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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I'd have no problem with a gasoline tax if there were practical alternatives available now. We should encourage the conservation of a product that is environmentally destructive and makes our nation dependent on unfriendly countries. However, putting more taxes on gasoline when little people like me have no other options is regressive. I'd be happy to curtail my use of gasoline if I had another way to commute to my job, but I don't. When gas was $4 per gallon, it forced me and people like me to cut other spending to the bone and beyond. How is that good for the economy? Also, didn't Mr. Sloan notice that higher gas prices were resulting in inflated prices on other consumer goods? All we need is to add skyrocketing inflation to our current economic woes. Let's put more taxes on gasoline, but not until there are other options!
Alan Sloan is right, and so it Tom Friedman, who has been calling for a tax on gas for a long time, with an even more compelling reason: our national security depends on it. During the seventies the then-high price of gasoline motivated people to consider fuel-efficient cars, but we can all see how long that lasted. It is astounding that Americans continue to buy and use gas-guzzling vehicles unnecessarily while our children, husbands, wives, dads, and moms are dying in Iraq because of our addiction to oil. The war didn't seem to motivate us to be more fuel-efficient, but $4 a gallon gas did!
Alan Sloan is exactly correct that an energy tax needs to be added to the price of gasoline to keep the price of gas at $2.50 to $2.75 per gallon. This does not prevent SUV owners from driving their vehicles, they still get to choose to do so. We have becomne accustomed to high fuel costs ($3.00 - $3.50 per gallon) so gas at $2.50 does not seem high.
At 20MM barrels per day of oil consumed in the US, a $0.50 tax on oil would bring in 153 Billion, $1.00 tax $306 Billion. Remember that our debt is now at least at $13,000 Billion dollars (Fannie, Freddie, FDIC, AIG, etc.), which we must begin to reduce now.
The problem with raising this tax is that there is NO ONE in Washington who can be trusted to take this money to begin paying down the debt; there is always another program that needs to be funded....
Why does Mr. Sloan assume that all people who drive 'gas guzzlers' are suburban professionals who can afford more fuel efficient cars? There are millions of working poor in our country who are driving older cars because that is all they can afford. The poor are always hardest hit by these kinds of taxes. With the downturn of the American economy, more and more of these lower income workers will have to commute to go where the jobs are. This temporary relief at the pump is a welcome relief to their pocketbooks. Why punish these hard working lower classes with what essentially amounts to a 'luxury tax' for those who can afford it? Should we instead be punishing the Big 3 US automakers for spending so many years churning out cars with low fuel economy?
Mr. Sloan is absolutely right. I've been thinking that we should do this for a while. If we have been paying $4.00/gallon of gas and then it drops to $2.50, nobody would notice if there was an additional $0.10/gallon tax added. Now would be the time to do it. We could use the extra revenue generated to help wean us off of foreign oil. How much revenue could we save if we didn't have to keep our military guarding and protecting our fuel supply on the other side of the world?
For a number of years, we've been trying to change the average fuel economy of vehicles in America by forcing the automakers to do so. This will never work as the problem is on the demand side.
As long as fuel is cheap, we will not care about fuel economy and as such, the automakers won't make economical vehicles.
However, if the prices goes up (as it did), Americans will change their buying habits (as they did). So put a price floor on gas and guarantee $4/gallon. This price will happen eventually, but if we control it at the government level now, we can ease into the transition instead of it being a huge shock.
And now is the time as we just came off the higher prices, so let's just keep them in place and work to make the transition now.
I totally agree with Sloan on this one. He is correct: we change our habits in the face of high gas prices and then, go totally back to our old habits when prices come down. And if we think prices cannot be manipulated, our experience of the past 2-3 months is absolutely evidence. Simply, a gas tax, while onerous, would send a message to the citizenry and to the auto industry who have not accepted any other message that we need to produce more fuel efficient cars.
Is Fortune Magazine's Allan Sloan out of his mind? Saddle already over-burdened tax payers with even MORE taxes?
I would remind Mr. Sloan that oil companies pushed us into this recession/near depression with their greed. They cranked gas prices up until consumers cut way back on travels and vacation plans and spending in general.
Consumers realized, hey this is not so bad, we CAN conserve but we won't be going to Palm Springs, The Grand Canyon or New York. Hotels, resorts and so many other industries suffered tremendous losses because America was staying home and cutting back on buying products they purchased before.
Hey, Mr. Sloan, here it is mid-November and stores are already having 'black sales' with Christmas music in the PA systems. Don't you get it? A legion Americans are almost broke as it is!
Now gas prices dropped almost 50% ~ after the oil industry and our deaf and dumb government realized they have almost killed their golden goose?
California voters (in recent years) have already authorized billions of dollars in additional gas taxes to build and repair freeways and roads, but to what end? California government siphoned-off huge chunks of that money for other pet projects and we still have pot holes but the millions and dangerous bridges everywhere.
And guess what? This November there was yet another measure begging for even more funds to repair those same freeways and roads and to build more this last ballot!
How about solutions? Hey GM, dust-off the prints again for your very successful *EV-1! Build a million of them. Instead GM is pushing that ugly Chevy Volt at a shocking $30,000 price tag! (pun intended). Sorry, they can't even get them out of the door.
Have you seen the front end of that Volt? God help you if you should crash that front bumper. That part alone will be a cool $2,500 or more I'd bet.
As for Ford, dust off the prints for your ORIGINAL Thunderbird hard top convertible (not the electric top that was crippled with problems). Keep the look absolutely the same, inch for inch, but put in a fuel efficient engine and use lightweight parts everywhere possible. Ford, you would sell two million of them if you didn't get greedy on the price.
The American auto industry has dug their own grave with built-in planned obsolescent, gas guzzling pig cars. Why is it a surprise that few want to buy them? And trust me, I've owned American cars, trucks and vans. Do I plan to buy another? Not just no, but hell no.
Please, Mr. Sloan, wake up. We have almost 10% unemployed and I am more than confident what they think of your outrageous plan. Yours is just one more way to reach deeper into the pockets of Americans for their hard earned dollars.
NO auto bailouts. Bankrupt, restructure with your best engineers and build efficient, dependable and economical cars! How tough is that?
Anthony O. Cardenas
Los Angeles
*See Who Killed the Electric Car?
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