A Smart -- and Reasonably Fair -- Way to Revisit the Gas Tax
Over on CapitalGainsandGames.com today, Andrew Samwick makes the case for increasing the gas tax -- and pairing that hike "with a reduction in the payroll tax rate that fully offsets the revenue increase." As he puts it:
At a very basic level, you get less of what you tax and more of what you don't. Looking at our long-term energy needs, every little bit of energy conservation helps. Looking particularly at our short-term macroeconomic needs, we would like to increase the returns [on] work. Both the payroll tax and the gas tax are thought to be regressive, so on balance, we are not doing much.
There are problems with that swap, since some lower-income Americans have to drive far more than others, and often have few options to reduce their mileage. In general, though, I think Andrew's right. Our recent run of $4/gallon gas showed that people will conserve when the price gets high enough. Gas may be back down to to $2/gallon now ($1.95 in Warrenton yesterday!), but it's sure to climb again -- so why not steer those dollars to our government rather than those of Russia, Saudi Arabia and Venezuela?
The idea of a price floor, as outlined by Tom Friedman, Philip Verleger Jr. and others, seems like an even better idea -- again, so long as it's balanced out by a reasonably fair cut elsewhere. But while that approach would bring the added bonus of predictable fuel prices for families, it would probably be much less predictable in terms of tax revenues generated -- and therefore harder to accurately offset with payroll or income tax cuts.
Whatever the specifics, though, I do hope the Obama administration explores something along these lines -- ideally in conjuction with tax credits and vouchers to help lower-income Americans improve their energy effiency, and not just cut back on their driving. Because this slump in energy prices certainly won't last forever...