A political commentator named Rick Gray has proposed imposing a federal surtax of $1.00/gallon on gasoline and diesel, exempting each licensed adult driver from the surtax on the first 30 gallons purchased each month. His idea is to discourage "excessive" driving -- but I wonder about unintended consequences. Do you, fellow gristers, see merit in this idea?
The first third of Gray's column makes the case for cutting back oil consumption, which I reckon need not be repeated here. The rest is quoted below:
We must begin cutting back on our consumption of oil, and every thinking American knows it.
The problem is, of course, that our two political parties prefer to focus on replacing foreign oil with something else. Preferably, something produced domestically. Ideally, something produced in abundance in the politically-vital state of Iowa.
Which is simply no answer at all. A gallon of corn-based ethanol requires nearly a gallon of gasoline to produce - making the ethanol subsidy a poor bargain, but a magnificent political boondoggle.
Besides, even if we could grow our own, switching fuels would do little to slow the melting of polar ice-caps, the rising intensity of violent weather systems, the lengthening life-cycles of destructive insects, and the spread of tropical diseases into once-temperate zones.
To reduce our dependence on oil, while addressing global environmental catastrophe, we must use less energy. To use a word grown curiously hateful to modern conservatives, we must conserve.
Great line, that!
The most effective first step toward conservation would be to engage ordinary Americans in thinking seriously about how to reduce their individual reliance on gasoline. If we could do that, the rest would follow.
The proof? Consider what happened to the market for gas guzzlers during last summer's spike in oil prices. Or the less dramatic, but equally significant, changes in driving behavior.
Market forces work. But that does not -- must not -- mean we should be entirely at the mercy of unregulated markets. We can manipulate markets to provide incentives for conservation -- and the obvious way to do that is artificially to raise the price of gasoline and diesel fuel at the pump.
Hmm, phrases like "we can manipulate markets" make me nervous. But read on.
The problem with this obvious solution is politics. Big Oil, Detroit, and the Club for Greed would go after a surtax the way Big Pharma and the insurance industry went after the Clinton health reforms.
You can picture the TV ads.
Still, a gasoline surtax is the obvious answer. And, since Americans aren't very good at trading short-term pain for long-term gain, we need a surtax that doesn't hurt too much, too quickly, or cause massive disruptions in our lives.
Indeed, we need a surtax that is easy to avoid. Because, as much as Americans hate taxes, they love avoiding taxes even more. What we need is a surtax that seriously influences energy consumption, but is relatively easy to beat.
OK, get ready for it ...
Something like this ...
A Federal surtax of $1.00 per gallon on gasoline (and diesel) -- exempting each licensed, adult driver from the surtax on the first thirty gallons purchased each month.
NB: the overall specific-tax burden, even including existing state and federal taxes, would still be lower than is typical across most of the European Union.
With modern technology, it should be a simple matter to issue each licensed driver a magnetized card -- like a valued customer discount card -- which gas station pumps could be adjusted to read. The card would automatically exempt the bearer from the surtax for the first thirty gallons purchased each month. Beginning with the thirty-first gallon, the surtax would kick in.
The idea of rationing gasoline is not new: it was practiced during WWII. In the spring of 1942, 17 eastern states instituted some form of mandatory gas rationing. By the end of the year, mandatory controls were in effect across the entire country. On average, motorists who used their cars for "nonessential" purposes were restricted on average to 3 gallons of gas a week (i.e., about 13 gallons a month).
Thirty years later, during the 1973-74 oil crisis, the idea of gas rationing returned. In 1979, during the next oil-price crisis, gas-ration coupons were printed but never used.
An important difference between the war-time rationing system and the one proposed by Rick Gray is that the former involved price controls, while the latter involves, in effect, a two-tier pricing scheme. People would still be able to buy as much gasoline or diesel as they want; it's just that they would have to pay more for it once their quota was fulfilled. In trade-economist language, it is analogous to a tariff-rate quota, or TRQ. One could call it a "tax-rate quota", I suppose.
Nonetheless, the potential for evasion, e.g. through black-market sales, would be real. Consider this description of war-time gas rationing from "Rationing: A Necessary But Hated Sacrifice":
Gas rationing, particularly disliked, fell victim to many of the schemes. The government claimed that "the gasoline black market involves, in many cases, experienced criminal rings, and is even drawing teen-age youngsters into its operations in dangerous numbers." Predictably, criminals soon produced counterfeit rationing coupons, which they then sold to gas stations and drivers. The OPA estimated that fake coupons accounted for five percent of all gasoline sales in the country. Criminals also stole vast amounts of coupons. The Washington D.C. office of the OPA lost real coupons worth 20 million gallons of gas to theft while thieves in Cleveland stole coupons for five million gallons.
Let's assume, for the sake of argument, that the ration cards would be made difficult to counterfeit. Surely such a system would be expensive to set up and administer. At the very least, it would necessitate installing new card readers at each pump (like pre-paid telephone cards, units would be subtracted after each purchase), other machines for allocating monthly credit, and 24-hour hotlines for dealing with complaints and reporting lost and stolen cards.
Would or should the under-quota rights be tradable? Efficiency suggests they should be. Would that lead to an increase in people who do not drive (yes, such people exist) applying for drivers' licenses in order to obtain credits they could then sell for a windfall profit? (That, one could argue, would be more "fair" than subsidies to biofuels, which are financed from general tax revenues, meaning non-drivers are cross-subsidizing drivers.)
Would purchases by companies or independent truck drivers be subject to a larger quota, or be exempt from the surtax? If so, could we expect to see the formation of a large number of new businesses created just to avoid the quota or surtax?
The average American drives around 10,000 miles a year -- about 30 gallons a month in a reasonably fuel-efficient vehicle. Thus, most Americans could avoid paying the tax by making minor modifications in their driving habits. Those who prefer driving gas guzzlers would have to get more creative -- but most people could avoid the tax, with a bit of effort.
Such an easily avoided surtax would produce relatively little revenue, but it would work a gradual change in individual consciousness. Like dieters counting carbs, drivers would start keeping track of how many gallons they consumed each month.
They're not already?!
Families would give more thought to consolidating trips. Those in the market for cars would look more seriously at fuel efficiency. Intelligent drivers would slow down a bit, which would make us all safer.
A surtax would also exercise a slight, but continuous pressure against long-distance commuting -- thus working subtly to curtail suburban sprawl.
Of course, all of these effects would follow from a simple rise in gasoline and diesel prices, or an increase in fuel-excise taxes.
But the immediate impact of the surtax would be nothing compared with its long-term utility. Having established a method of encouraging conservation, we could gradually ratchet down the number of gallons exempted -- say, one gallon every two years -- until, in twenty years, the surtax applied to every gallon over twenty.
That's a serious reduction in gasoline consumption -- but one which allows plenty of time for Detroit to design sexy, fuel-efficient vehicles, and for developers to discover the potential of reviving our cities and close-in suburbs. Time, indeed, for our metropolitan areas to get serious about mass transit.
A surtax along these lines would provide a flexible tool for gradually moving America toward serious energy conservation. It wouldn't be painless, but it would minimize disruption while imposing a slow, steady market pressure in favor of energy conservation.
And it would square with what we know about Americans' attitudes toward taxes. By involving all of us in a perpetual hunt for new ways to avoid using more than the exempted number of gallons each month, it would enlist American ingenuity in a permanent search for ways to reduce our dependence on oil.
Worth a try, don't you think?
Well, what do you think? Is a hybrid instrument like a tax-rate quota the only politically feasible way to raise taxes on transport fuel? Do changes in technology since the 1940s and 1970s make administering this kind of rationing system more viable and more likely to be fair?
Finally, a necessary disclaimer: by posting this I am not endorsing Mr. Gray's proposal. Indeed, I am generally a skeptic of heavy-handed market manipulation. But I do think his proposal raises some interesting questions for discussion.
Comments
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lloydalter Posted 7:58 am
28 Dec 2006
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Biodiversivist Posted 8:19 am
28 Dec 2006
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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amazingdrx Posted 8:31 am
28 Dec 2006
The blame needs to go to big oil, opec, and the oil friendly political side instead. How do we do that and still reduce oil consumption with higher prices and put that extra tax money into alternatives?
By cutting subsidies to oil companies. Mo more tax breaks, oil lease giveaways, free passes on monopoly gas pricing. Cut the corporate welfare then use half the savings for direct tax credits to consumers who buy plugin vehicles, geothermal heating/cooling systems, and solar, wind, wave, and biogas/fuel cell energy systems.
Use the other half of cuts in corporate welfare to pay down this huge oil war deficit. Make these corpoRATs pay for at least part of their oil wars.
Then big oil will fix prices upward to get that lost welfare check from consumers directly. they will have big ad campaigns blaming the pricxe rise on green politicians, but the public won't buy that. They'll blame the oil rats and their hired hands in the whitehouse and congress instead.
Put the blame where it belongs, then our enviro friendly representatives can vote to cut corporate welfare without fear of tax hike swiftboating come election time.
Raise gas taxes and an oil chimp will get appointed again, we sure don't want another duuh duuuh..duuuh..bya.
http://amazngdrx.blogharbor.com/blog
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willa Posted 8:41 am
28 Dec 2006
One thing I wonder about: how would this impact illegal immigrants? I totally don't want to start a debate on immigration here, but many of the working poor in this country are now here illegally, and whatever you think about their presence, the fact is that they're here and they need to buy gas so they can get to work. If memory serves, there are now some places (California?) where illegal immigrants can get US driver's licenses, but I'm pretty sure that's not the case most places.
Privacy seems like a concern, too. I know there are a lot of people (like me, for one) who don't want the government tracking every private citizen's every move. This tax seems like it might invite the government to collect more data than it really should, and frankly, they've got enough already. I worry more about global warming than about the government spying on me via gas purchases (and what the hell, I buy mine with a credit card, so they already know everything about me anyway, given that I hardly expect my credit card company to respect my privacy if the government requests data), but all other things being equal privacy would be a good thing.
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Engineer Posted 9:12 am
28 Dec 2006
Changing the spots on the top critter is not necessarily going to make the problem(s) go away.
In theory there is no difference between theory and practice, but in practice there is!
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amazingdrx Posted 9:24 am
28 Dec 2006
But these guys serve it absolutely. Even daddy bush has disagreed with this war for oily empire from the start. The war cost constitutes over a dollar per gallon hidden subsidy for big oil now.
Gerry Ford's conversation with Woodward was released today. Ford said he would have not invade Iraq and would have found a different way. There is a limit to how far most US leaders would go for their big oil friends.
But with this crew it's go for broke! And boy are we broke. And the loans are owed to china, the looming future superpower. A corporate kleptocracy even worse than this one ruling the world? No thanks.
http://amazngdrx.blogharbor.com/blog
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John Galt Posted 9:53 am
28 Dec 2006
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Engineer Posted 10:05 am
28 Dec 2006
As far as this proposal...I think the system would be gamed before the ink was dry. And that exemptions would be issued that rendered it moot for connected individuals.
I've said for years (more from an accident/insurance cost perspective than efficiency) that the US needed to raise the driving age to 18 and toughen up the test to get a drivers license.
Fewer (and better trained) drivers on the road would solve a whole raft of problems...
In theory there is no difference between theory and practice, but in practice there is!
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KathyF Posted 2:22 pm
28 Dec 2006
We need something far more drastic: Public transportation for everybody!
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Delay And Deny Posted 3:11 pm
28 Dec 2006
So pretty people are made to wear bags on their head, and ballet dancers have to perform with concrete blocks on their feet. This way no one can feel anything but homogeneous.
These insane Lib penalties for living life and wanting to have fun have got to stop.
We should be thinking only about how to produce 100 times more energy per person. It's not about scrimping and saving, its about using our God given creativity to think our way upward and onward.
The Texeme Construct offers international text memetics construction and textcasting services.
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Ron Steenblik Posted 4:41 pm
28 Dec 2006
We should be thinking only about how to produce 100 times more energy per person. It's not about scrimping and saving, its about using our God given creativity to think our way upward and onward.
Most "penalties for living life and wanting to have fun" are addressed at externalities: costs that a producer or consumer is able to pass on to others.
The penalties that are not -- e.g., income tax -- also reduce the ability of people to live life and have fun, to the extent that having more disposable income would allow individuals to pursue those aims. Some of those government revenues help improve lives very concretely: by protecting people from aggression and from communicable diseases. But some is wasted, or actually lines the pockets of those who already have plenty of money to pursue their happiness. I should think that every citizen should be concerned about such waste, since it means they are paying more in taxes than they need to.
That brings me back to energy. Nobody is standing in the way of bright ideas. If somebody can find a way to collect and deliver CLEAN energy 100 times more efficiently than currently, the world will beat a path to his or her door. What many politicians want to do, however, is subsidize the transition away from oil.
And from where do those subsidies come? From taxpayers.
To use an over-used aphorism, there is no free lunch. If the country decides that high market prices for oil are not going to stimulate conservation and the search for substitutes as fast as it would like, then additional incentives will be needed. Which is more efficient and equitable: taxing what one wants to reduce the consumption of, or taxing labor and using the revenues to subsidize alternatives?
A footnote: I agree with Lloyd Alter: more efficient than a tax-rate quota would be simply to tax all fuel and give every adult a tax credit of $360 a year.
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KathyF Posted 11:52 pm
28 Dec 2006
Get with the trend!
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JMG Posted 1:19 am
29 Dec 2006
This is an arbitrary number, picked out of a hat, and therefore subject to lots of opposition for that reason alone.
This doesn't help with the whipsaw problem, as gas prices would still fluctuate wildly--even moreso now that there's a $1/gallon incentive to be sure to use up that first 30 gallons.
If this did lead to conservation, the price of oil would drop, causing the price of gas to drop, encouraging more consumption.
System easily gamed--smart cards can be reprogrammed, the system can be hacked, cards can be issued for ghost people, etc. Lots of bother for small gain.
The better approach is to set a fixed total -- say, $4/gallon for now, to increase by 25 cents per year, first using the revenue to provide full liability coverage for all drivers (in other words, to eliminate the need for anyone other than full-electric vehicle owners to purchase liability insurance), and then to offset payroll taxes (reducing social security taxes for all, in other words).
This is a more efficient way to deal with the regressivity of gas taxes, because social security is the most viciously regressive tax we have because of it's flat rate and its $90k cutoff. Likewise, the poor are hit hard by insurance requirements (and are heavily represented among the 1 in 7 people who are uninsured motorists) -- so using the gas surtax to provide automatic liability coverage for them is a real boon, because it provides efficient coverage for those who have been buying it from an insurance company AND it makes sure that those who have been avoiding it entirely are brought into the system (meaning the rest of us can stop paying extra for uninsured motorists' coverage).
This would provide a strong, continuing incentive to minimize gas consumption period, rather than an incentive to use 30 gallons, while dealing with two other intractable problems (the annual-insurance-premium incentive to drive MORE and the regressive nature of social security) at the same time.
As conservation takes hold, any reductions in the price of oil cause the surtax to increase, leading to more revenue to eliminate social security taxes, then to fund medicare, etc. In other words, the cars would start to pay their way, while helping our economy by helping us eliminate taxes on the things we want (employment) by taxing the things we don't want (fossil fuel use, CO2 emissions, sprawl, etc.)
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Engineer Posted 1:20 am
29 Dec 2006
Of course, that would require people to accept some personal responsibility for their choices...what am I thinking...
Oh, and on the Insure/Ensure usage, one of my girls was an English major. "ENSURE and INSURE are interchangeable in many contexts where they indicate the making certain or inevitable of an outcome, but ENSURE may imply a virtual guarantee <the government has ensured the safety of the refugees>, while INSURE sometimes stresses the taking of necessary measures beforehand <careful planning should insure the success of the party>.
In theory there is no difference between theory and practice, but in practice there is!
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dennis1200 Posted 10:35 pm
29 Dec 2006
I spent a year in Germany, where gasoline is about 3 times as expensive as here, if not 4 (depends on euro-dollar exchange rates). People were initially behind a gasoline tax, whose proceeds would go to benefit environmentally beneficial projects and organizations. However, the people themselves have not seen much in the way of concrete results which they can appreciate, see, or touch. It would be of utmost importance to show people that it is in their ultimate best interest to support and deal with a gas tax, because while there will always be a few eco-buffs like myself who are willing to put out extra effort to find out where things come from, how they are produced, what chemicals are in which products, etc. etc., the vast majority of people have chosen another set of interests which dominate their time.
If anything, I think the most immediate result would be a shift in car models. Germans still drive quite a bit (and quite fast), but their cars are so much more fuel efficient than ours, and an Opel doesn't small at all relative to the other cars on the road. I unfortunately have no insights as to why people buy gas-guzzling SUVs and all sorts of conveniently named "light trucks", but that is a mentality which will also have to be addressed.
And why not a tax on driving into the city as well? Some experiments in England and Norway(?) I have heard of. That would be more of a sprawl-combative initiative - feel free to live 25 miles out, but it is going to cost you. Proceeds would go primarily to mass transit, which otherwise shrivel when people flee to the suburbs.
www.FamilyFarmed.org
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amazingdrx Posted 11:06 pm
29 Dec 2006
Kind of like the energy saving labels put on appliances. Maybe Amory Lovins' organization could figure out a scheme that congress could vote on?
Would it add more of a mess to the IRS? That might be unavoidable. oh well.
http://amazngdrx.blogharbor.com/blog
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eddie torres Posted 5:55 am
31 Dec 2006
If the ultimate objective is reducing gasoline consumption, which strategy has a higher chance of success:
a) eliminating all US Federal subsidies for the oil industry (which would raise the price at the pump)
b) a tariff-rate quota like the one Rick Gray proposes (which would raise the price at the pump)
Answer: neither. There aren't enough Americans willing to sacrifice what they currently have in order to build a better world. Perhaps a truckload of illegal immigrants can be hired to do the heavy lifting.
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Ron Steenblik Posted 8:20 am
31 Dec 2006
I'm not sure if your question is a rhetorical one. To begin with, I don't see what illegal immigrants have to do with the discussion. But let me take your points one by one:
If the ultimate objective is reducing gasoline consumption, which strategy has a higher chance of success: (a) eliminating all US Federal subsidies for the oil industry (which would raise the price at the pump)
Even President Bush has advocated eliminating many of the current subsidies and tax breaks enjoyed by the oil industry, saying at current prices they don't need them. (Too bad he's not saying the same about other energy industries as well.) It is a central policy of the Democratic leadership in the House of Representatives, which has vowed to "[roll] back the multi-billion dollar subsidies for Big Oil" within the first 100 hours of the first session of Congress in 2007.
Whether removing those subsidies and tax breaks will have much of an effect on the retail price of gasoline or other petroleum-derived fuels, at least in the short term, is doubtful. Most occur upstream, providing large wealth transfers. But much of the production benefiting from these transfers would still take place were the subsidies and tax breaks to be removed. In any case, there is an international market in oil, and it global developments in supply and demand that drive the price of a barrel of crude, not U.S. tax breaks.
If you want to count the U.S. military expenditure in the Middle East as a subsidy to oil, then there probably would be more price volatility were that expenditure to be cut back.
(b) a tariff-rate quota like the one Rick Gray proposes (which would raise the price at the pump).
Yup, it would raise the price at the pump.
There aren't enough Americans willing to sacrifice what they currently have in order to build a better world.
What would Americans be sacrificing in the case of (a) -- the right to pay higher taxes to fund wealth transfers to the oil industry? In the case of a policy like (b), or more generally a higher rate of taxation on transport fuels, the acceptance of such a policy would depend in large part on how it is implemented. If its effect on the overall tax burden were neutral (e.g., through a corresponding reduction in income tax), and it included transfers to help out poorer drivers (e.g., through a fixed annual rebate), who knows?
I am old enough to recall a time when speaking favorably of universal health insurance was enough to get one branded a Communist. By the beginning of the first Clinton Administration, however, there was widespread support for the idea. Unfortunately, when it finally emerged from the Task Force on National Health Care Reform (which was headed by then First Lady Hillary Rodham Clinton) in September 1993, the basic notion of providing universal health care for all Americans had morphed into a complex proposal running to more than 1,000 pages. Within a year, the plan was declared dead. But that is a story for a different blog.
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ErikB Posted 3:21 pm
02 Jan 2007
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