Saturday, November 10, 2007

Eliminate the Gasoline Tax? ... by Alan Caruba

Eliminate the Gasoline Tax?
By Alan Caruba


With the cost of a barrel of crude oil edging toward $100 (remember the good old days when it was only $70?), it’s time to look at the gas tax. In August, the Cato Institute published a “Policy Analysis” that was titled, “Don’t Increase Federal Gasoline Taxes—Abolish Them.”

Masters of turgid prose, Jerry Taylor and Peter Van Doren, Cato senior fellows authored sixteen pages of a tightly reasoned argument against raising the taxes on gasoline, plus seven small-print pages of footnotes documenting their position. A prodigious amount of scholarly effort was invested in this analysis.

Fortunately for me, there was an “Executive Summary” on page one that helped to identify the major themes. “Gasoline consumption does not necessarily distort American foreign policy, impose military commitments, or empower Islamic terrorists organizations,” say the authors.

“State and federal gasoline taxes should be abolished.” That’s the kind of thing that catches my attention.

I was thinking about it the other day as I drove a short distance on New Jersey’s Route 280, a testament to potholes and the ruination of roadways imposed by a combination of Mother Nature and relentless commuters. As a lad in the 1960’s, I was the editor of a weekly newspaper and recall watching the highway’s construction. Why, I wondered, wasn’t this roadway being maintained properly?

Then I remembered that I was, after all, in New Jersey! Spending money on highway repair is far less glamorous than creating more entitlement programs and borrowing into the next century to pay the pension demands of teachers and other civil servants.

You just have to like people like Taylor and Van Doren who say things like, “In fact, we find no compelling reason for a federal gasoline tax at all and call for its repeal. Nor do we find any compelling case for state gasoline taxes.”

According to the American Petroleum Institute, “The nationwide average tax on gasoline is 45.8 cents per gallon as of March 2007, up 0.3 cents from October 2006…the federal tax on gasoline is 18.4 cents per gallon. The average state gasoline excise tax remained consistent at 18.2 cents per gallon.” Other taxes such as sales, oil inspection, underground storage tank, and miscellaneous environmental fees add 9.15 cents per gallon to the average tax. Do the arithmetic.

Taxes differ, however, from state to state. New York extracts 60.8 cents per gallon, while Arizona takes only 37.4.

One of the common arguments for taxes is that the world is running out of oil, but they note this concern is based “on shaky ground…concerns that conventional crude oil is becoming scarce in any meaningful sense have not withstood close scrutiny.”

They go on to note that our frequently cited “dependency” on oil imported from “unstable countries” is the result of a conscious decision to continue this practice because it is, in fact, cheaper in many ways.

To those politicians calling for higher taxes to force people to drive less, conserve energy, or switch to solar or wind power, “government solutions have the dubious distinction of being more expensive not just most of the time, but all of the time.”

Citing the price fixing in the 1970s when the government wanted to reduce import dependency, the authors note that, “Consumers were made worse off as a consequence.” Anyone who remembers the long lines at gas stations can testify to that.

Listening to George W. Bush say that we are “addicted” to oil makes about as much sense as saying we are addicted to water.

The Greens have, as long as my memory serves, hated gasoline as much as DDT. We instinctively know that taxing gasoline “will not discourage highway congestion and reduce accidents on the roadway.” And common sense tells us, “A national emissions tax would be inefficient because it would ignore the large geographic variation in damages associated with pollution.” That is to say that Los Angeles gets more than, say, Bozeman, Montana.

“Many foreign policy analysts think that U.S. oil imports are dependent on friendly relationships with oil-producing states. The fear is that unfriendly regimes might not sell us oil.” Well, tell that to Hugo Chavez in Venezuela or Iran’s Mahmoud Ahmadinejad whose economy is dependent on selling oil and not influenced by whether they think George W. Bush is the Devil Incarnate.

Moreover, “The fact that Saudi Arabia and Kuwait paid for 55 percent of the cost of Operation Desert Storm suggests that keeping the Straits of Harmuz free of trouble is certainly within their means.” To those who say we are in Iraq because of that nation’s oil, the memory of 9/11 has grown very dim indeed. We are also in Afghanistan, a nation famous for its heroin, not oil production. Keeping one’s eye on the ball, i.e., terrorism fueled by Islamic fanaticism, is essential when all manner of spurious reasons are given to raise taxes on gasoline.

“Once oil leaves the territory of a producer, market agents dictate where the oil goes, not agents of the producer, and anyone willing to pay the prevailing world crude oil price can have all he wants.”

What gasoline taxes do is “extract revenue” and this is what politicians live for. It has little to do with whether it makes any sense for Americans to be paying taxes on an energy source that is absolutely essential to our daily lives and the welfare of the national economy.

If I thought the potholes on Route 280 would actually be fixed, I wouldn’t mind that much about the gasoline tax I pay every time I fill up the tank, but I stopped believing in the Tooth Fairy along about the time I concluded that government is a confiscatory enterprise with little concern for my well being or wallet.

Alan Caruba writes a weekly column, “Warning Signs”, posted on the Internet site of The National Anxiety Center,

© Alan Caruba, November 2007

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Anonymous said...

I got a better idea, let's dump the INCOME TAX, and SCRAP THE TAX CODE, and communicate with our Rep's and Senators to co-sponsor the FairTax Act of 2007 (now, 71 members of Congress have already sponsored/co-sponsored this). While many who are invested in the current income tax system seek to demagog the well-researched FairTax plan, FairTax's theoretical underpinnings have been professionally reviewed, and its acceptance in the professional / academic community continues to grow.

Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown, because of the hidden aspects of the current system that make political accountability impossible. Tom Frey, of the DiVinci Institute, foresees the coming collapse of the income tax system.

Here is why the FairTax MUST replace the income tax. It's:

• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity

Its benefits are as follows:

• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for taxes payable on monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates

• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets

For the COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie" increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow

The income tax system must ultimately fail, if for no other reason than that Washington politicians cannot seem to wean themselves from being "sucked down the spending hole" while seeking ways to hide the magnitude of taxation from those who ultimately pay for all of it - every working American. It's well past time to scrap the tax code and pay for government the way that America's working men and women are paid - when something is sold.

(Permission is granted to reproduce in whole or part. - Ian)

Steve's T's said...

OIL = Offensive Idiotic Leadership
This guy is an Idiot(BUSHwhacker). We should not only raise the gasoline taxes but we should implement the old gas gassler fee for vehicles that average under 30 mpg. We are spending 1 Billion dollars a day on OIL. Money going overseas instead of American pockets that doesn't sound to Patriotic too me. It's time to start implementing Alternative Fuels. OIL = War = Stupidity to Infinity. Steve's T's

Longstreet said...

Thank you, Steve, for those illuminating comments. The offensive manner of your presentation does nothing to assuage the reader's suspicion of your "left-leaning, "tree-hugging",persuasion. Name-calling serves only as a measure of the depth of your argumentative talents. It adds nothing to the merit.

Best regards!


Steve's T's said...

Yes, I agree with a flat tax rate but I wonder if it will ever be done in my life time. It makes most politican's jobs irrelevent therefore I don't know howb it would efver get passed.

Anonymous said...

Steve, one must ACT to make things happen.

Frank said...

I like the tax system as it was BEFORE the civil war.... There was no personal income tax, only corporate......