Taxation without privation 2

This is days old now -- an eternity in blog years -- but the blogosphere was all a-twitter earlier in the week about this paper by economist Jayanta Sen, arguing that a stiff tax on crude oil, far from bankrupting the US economy, would actually transfer more than $100 billion a year from foreign governments to U.S. consumers.

Yes, consumers would pay steeper prices for gasoline. But since all of the oil-tax revenue stays within the U.S., that money continues to stimulate the economy. Meanwhile, we'd import less oil -- and, as a consequence, we'd export less money to pay for it. I'll let Sen explain things:

[T]he wealth transfer savings for the United States ... should be in the range of $108 to $152 billion a year. The new tax revenues ... can be returned to the U.S. consumers as a lump sum, thus providing the economic stimulus. The reduction in crude oil consumption ranges from 7.13% to 10.30% while providing a stimulus (defined as additional purchasing power to consumers) to the economy of $95 billion to $133 billion a year.

The title of Sen's paper: "A Tax to Save the US $100 Billion a Year and Solve Global Warming?" Now, cutting back U.S. gasoline consumption by 10 percent won't solve global warming by any means. Still, it sounds like a nifty plan to me. Any takers?

Clark Williams-Derry is research director for the Seattle-based Sightline Institute, a nonprofit sustainability think tank working to promote smart solutions for the Pacific Northwest. He was formerly the webmaster for Grist.

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  1. biopolitical Posted 6:43 am
    12 Nov 2005

    What about the costs?What about all the goods and services the US will cease to produce because of the diminished oil input to the economy? Maybe you personally don't give a damn about them, but you have to display those losses along with the good-looking numbers. With the gas tax less money would go to oil producing countries, but also less money would come into the US because the US would sell less stuff to other countries. And more money would go to other countries to buy things those countries would produce more cheaply than the US because they would haver cheaper gas.
    If you want to reduce gas consumption above all other considerations, then the gas tax is a good idea. But keep in mind that this will not result in collateral economic miracles. Quite the opposite.

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  2. jdhlax Posted 4:54 pm
    14 Nov 2005

    Costs?What about the Earth?!  Jeeze, are there any environmentalists here, or just typical Americans who think that money is more important than everything else?
    To answer the question, yes a gas tax would be great.  I don't care about the economics (I can't wait to see all of you who think money is so important try to eat, drink, and breathe your money once you've made the land, water, and air unusable), but a nice high gas tax would do wonders for the environment.  The tax should be high enough to make gas cost at least as much as it does elsewhere in terms of percentage of income.  This would probably raise the cost of gas to about $10/gallon.  We need to reduce American driving by a lot more than 10%!

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