Friday, April 23, 2004

Gasoline tax?

In a recent widely read blog posting, Andrew Sullivan proposed a substantial increase in the gasoline tax in order to pay for the war and ease our oil dependence on the Middle East. This is a position which is anathema to almost all native-born Americans. One such, James Lileks, countered Andrew Sullivan's argument with some proposals of his own. Just to throw some more spice into the pot, Roger Simon partially agrees with Sullivan, but suggests that for the Federal government to require more fuel efficiency would solve the problem in a more humane manner.

Here are the facts as I see them.

1. We are overly dependent on foreign oil. That dependence is a strategic risk to the country because the supply could be cut at any time and complete disrupt our economy.
2. That dependence is growing with time. Much of the oil that was once plentiful in Kansas, Oklahoma, and Texas has been drained. Further domestic sources of oil will be found only in increasingly environmentally sensitive areas such as the Alaska wilderness or off the coast of California.
3. The money spent on oil from the Middle East is often funnelled into terrorist activities or into Madrassas which preach hatred against the West. We are directly paying for the hatred.
4. Most of the dependence is due to the automobile.
5. In most of the country the automobile is an absolute necessity because our cities have been built and populated under the assumption that the automobile is available. For example, my house is three miles from the nearest grocery store. That's not walking distance with four bags of groceries in your arms. My town has zoned all commerical activities away from my house.
6. Gasoline is cheap. Even at current prices, $40/week to have virtually unlimited mobility is a very small price to pay, even for someone earning minimum wage.
7. Other alternatives to oil from Saudia Arabia and Venezuela could be found but the process of finding them through technology is expensive. Until the price of oil rises above a certain level such activities are uneconomic.
8. OPEC is fully aware of 7. and will endeavor to keep the price of oil below that pain point.
9. Americans pay substantially less in gasoline tax than other wealthy nations.
10. The flow of Middle Eastern oil can only be maintained in the long run by substantial commitments of American troops in places such as Iraq and Kuwait to prevent malefactors like Saddam Hussein from grabbing the oil and holding us hostage.

Most everyone wants to reduce the dependence on foreign oil. But any such reduction will necessarily cause some pain. Studies show that 96% of all Americans want other people to ride public transportation. If it's available. And if they don't have to pay for it themselves. But it isn't and they will have to. None of the alternatives is palatable. No one wants drilling in environmentally sensitive areas and a substantial fraction of the population is fanatically opposed to it. No one wants to be funding the hate-schools. No one wants to pay more for gasoline.

The bottom line is that with an array of bad choices we are choosing to make no choice. But that's a choice. It's an elephant-in-the-living-room sort of problem. We all know the current choice is a bad choice but no one wants to discuss it.

I have two thoughts here.

First, it seems to me quite clear that we are spending money to defend and protect the supply of petroleum into the civilized world. We fought a war to remove Saddam Hussein from Kuwait and we stationed troops in Saudi Arabia--much to bin Laden's horror--because we were afraid of the consequences on the world oil supply if Saddam Hussein were to take control of it. Now, this protection takes money and that money has to come from somewhere. Why should the general taxpayer (or even worse, future taxpayer) of the United States have to pay for something from which only a portion of the country is benefitting? I believe it's an issue of fairness. If gasoline is an issue (and I believe it is), then the people who burn it should pay the costs.

What I do favor strongly is for the system to be made as transparent as possible. Thus, people should pay for those costs to society that they incur. Actions have consequences and the people who cause those consequences should bear the costs. Further, people respond to incentives, not to invective. If people pay at the pump for the costs they incur, they will incur them less.

Second, there's the issue of efficiency. This was well stated by Ralph Phelan in this thread on Roger Simon's blog. "If you're in favor of government action to encourage higher gas mileage, a gas tax is the most direct and therefore efficent way to do it." Indeed. There may very well be people who need to burn a lot of gasoline and get low gas mileage for whatever reason. Let them pay for it and then there will be an equitable distribution of resources. As Mr. Phelan added: "Using government to say *what* society wants can be appropriate, but it's almost always best to leave the *how* to the free market."

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