Posted on 12/30/2008 1:25:07 PM PST by andrew roman
Three times in the last five years Pulitzer Prize winning columnist Charles Krauthammer has lauded the idea of raising the tax on gasoline as a way of suppressing consumption, thus - according to the theory - lowering global gas prices and reducing dependency on foreign oil. His latest construct of an idea he is obviously smitten with, published this past weekend in The Weekly Standard, calls for this new gas tax hike to be "offset" with a cut in the FICA tax, creating a "net-zero" effect.
So goes the hypothesis.
He breaks down the numbers this way ...
The average American purchases 14 gallons of gas a week. Krauthammer proposes a $1 a gallon tax increase to consumers while giving taxpayers a $14 FICA tax cut. The Feds therefore will not be taking in any additional revenue, according to the plan - and to Krauthammer, that's the key. It must be revenue-neutral to work.
The idea, as he explains it, is that "cash can be spent on anything."
He writes:
You can blow it all on gas by driving your usual number of miles, or you can drive a bit less and actually have money in your pocket for something else. There's no particular reason why the individual consumer would want to plow it all back into a commodity that is now ... more expensive. When something becomes more expensive, less of it is bought.
Krauthammer is a world-class thinker, no question. To this day, I admire him greatly.
But respectfully, I wonder if he has thought this position all the way through.
The idea is, first and foremost, predicated on the idea that the "extra" $14 a week "in your pocket" could be used elsewhere instead of at the gas pump. In fact, for the Krauthammer plan to succeed, it would have to be, otherwise why bother?
But is this a realistic expectation?
Millions of Americans, for example, use their credit cards to buy gasoline. For millions more, debit cards have largely replaced cash for everyday purchases. Budget-conscious folks are increasingly concerning themselves with how much money is available "on their card," rather than how much cash is in their pocket. Personally, my wife and I use our debit cards at the gas pump. Our paychecks are direct-deposited on a bi-weekly basis without the money ever finding "our pockets" until we swipe the cards or hit an ATM machine. An extra $1 at the pump per gallon will mean virtually nothing to me - and many other debit card users - knowing that an extra $14 has been deposited into the bank thanks to the FICA cut. I suspect there will be many, in fact, who will be standing there at the pump, feeding their cars, thinking, "I just got a few extra bucks in my paycheck. I can fill her up."
Indeed, while I agree with Krauthammer that there does come a point when the price of gasoline gets so high that it directly affects the amount of driving Americans do - as we saw this year - is that point really fourteen dollars a week? Especially since we've seen such dramatic drops in the price of oil in recent times?
For Krauthammer's idea to work, in short, everyone who receives that $14 FICA cut would have to be sure to use 14 less gallons a week - on average. How many people would actually make the deliberate effort to cut back on their consumption in this way? Rest assured, I'm not giving the preverbal middle finger to $14. (That'll score me a couple of orders of small fries in Manhattan, won't it?) I'll take the extra money anytime. But I just don't see many gas pumpers trimming their fuel expenditures like that - certainly not as many as it would take for this plan to be functional and effective.
Second, the entire "net-zero" concept only works if gas taxes remain untouched. By a show of hands, who believes for even a fraction of a second that politicians - on either side of the aisle - have the ability to keep their meat hooks out of the gasoline pump?
I don't see many.
And if gasoline taxes were raised (bet a limb on it), a corresponding cut in the FICA tax would then have to be implemented. Is there anyone alive who believes this is possible while Democrats exist?
I invite you to stand on your head if you do.
Third, as a resident of the nation's largest city, there are mass transit options available to me that are not available to people who live in less populated areas of the country. In Manhattan, for example, there are tens of thousands of people who simply have no need for a car on a daily basis. This is not the case, however, for the overwhelming vast majority of Americans.
Even smaller cities that do have a bus system - like Fort Wayne, Indiana, for example (a place I lived for a few years) - cannot possibly provide adequate public transpotation to its people, primarily because they no longer have centralized populations. Only the largest metropolitan areas of the United States can begin entertaining the concept of cutting down on automobile use in favor of mass transit - and good luck making that happen.
My wife, for instance, is originally from rural Northwest Ohio - a place I also had the pleasure of living for several years. (This Brooklyn boy has been around). Out there, the "blocks" are a mile wide and a mile long, with names like "County Road J" and "6." Living out in "walk to the mailbox naked" country, vehicles are lifelines. Krauthammer's proposal would disproportionately affect residents of communities that do not have mass transit alternatives - which is a sizeable chunk of the American population.
This would, in effect, mean that suburban and small-town America - far more reliant on their cars - are helping, to some extent, to subsidize urban America.
It is also important to remember that all across "fly-over" country, bigger and heavier vehicles are the norm because of the need to be able to commute in treacherous wintry conditions. These vehicles consume more gasoline.
Fourth, no matter where one lives in the United States, the goods that we purchase are made available to us because they are shipped to our local markets and stores via trucks - everything from clothing to food to electronics to gasoline itself. Higher gas prices for those who deliver the goods means higher prices for those who purchase and consume the goods.
I'm somehow missing the benefit of this.
As one poster at the great Free Republic.com website pointed out:
NO ONE is reporting that, in this past year, over 1,000 trucking companies have folded, including some of the top 100; A year ago, the industry was short about 8,000 drivers - now, there are tens of thousands out of work. This is directly linked to the price of fuel.
The idea apparently, as Krauthammer proposes it, is to tax ourselves into energy independence. As he laments, the United States keeps letting these golden opportunities to raise gasoline taxes slip by.
In 2004, he wrote:
In 2005, he wrote:By the mid-'80s, rational consumer reaction to high prices — home insulation, fuel-efficient appliances and lighter cars — had actually solved the energy crisis. We had OPEC on the run. In July 1986 oil plunged to $7 a barrel. It is now $41 a barrel. We had a golden moment, and we let it pass.
We have a unique but fleeting opportunity to permanently depress demand by locking in higher gasoline prices. Put a floor at $3. Every penny that the price goes under $3 should be recaptured in a federal gas tax so that Americans pay $3 at the pump no matter how low the world price goes. Why is this a good idea? It is the simplest way to induce conservation.
And just this past weekend, he called his "net-zero gas tax" proposal a "once in a generation chance."
In June, when the price of oil was over $130 a barrel, Steven Mufson and David Cho of the Washington Post explained:
Economists fear that the steadily rising price of gasoline is eating into the money consumers have to spend on other items and that fuel prices could be a drag on an economy already weighed down with concerns about housing prices and the stability of financial institutions.
"It saps people's purchasing power," Mark Zandi, chief economist of Moody's Economy.com said, "If they have to spend more to fill their gas tanks and heat their homes, everything suffers." He added that he worries that "the surge in energy prices overwhelms the economy if we stay here for very long."
Zandi said energy costs -- including electricity, gasoline and heating -- now account for about 6.5 percent of the average household budget. For the poorer half of the nation's households, energy costs are gobbling up close to 10 percent of family budgets.
Precisely.
These are the among the barrel-o-concerns I have when reading proposals like Krauthammer's that call for tax increases.
And now, with the economy sick in bed for the foreseeable future, and gas prices plummeting, is raising the gasoline tax really the right move to make now? Smack dab in the middle of a recession?
Krauthammer's desire to slash American dependency on foreign oil is one I wholeheartedly share. And if I actually thought there was even an iota of likelihood that something like this could work to achieve that end, I might actually consider it - might. But even after three readings of his piece, I just cannot get on board. Admittedly, I am predisposed to loathe supporting federal tax increases as a means of fixing anything - but his proposition, well-written as it is, does not click for me.
Perhaps I have a bit of an antiquated view of things - something I am fully prepared to admit. Maybe I even exude a smidgen of naivety - something I am happy to entertain with the more learned around me. But I'm wondering if it at all makes sense to formulate some sort of proposal that is inclusive of something other than raising the gas tax, like ... oh, I don't know, some tasty tax cuts (thus keeping more money in the hands of those who make it ... and spend it) ... leaving the price of gasoline alone (no government intervention, if you please) ... and more domestic and offshore drilling? (more windmills, Mr. Kennedy!)
At least as a start?
Or something like that?
Just a thought.
-
What we really need to do in my estimation is to ban the importation of oil into the US altogether while simultaneously going after every possible source of energy available to us on a war footing. THAT would pretty much shut down every rogue regime on the planet whil,e messing us up about as badly as we were messed up during WW-II (which we survived). We’re at an ideal point for doing such a thing right now.
It should be illegal for rich guys to suggest raising “everyman” taxes. Granted they may pay them too but it’s a much smaller portion of their earnings.
Krauthammer has Beltway Insider disease. He’s a Washingtonian elite and he’s scarfing down the kool-aid ... A new tax is a solution to _____________________ (fill in the blank) problem.
He's tolerable when he comments on Foreign Policy, but at Domestic stuff he's a disaster.
L
We can’t offset the gas tax with a fica cut, because Social Security is already going broke, and the FICA tax is supposed to fund Social Security, while the gas tax funds road maintenance and improvement.
I think a gas tax increase is a reasonable way to lower consumption. We saw that when gas got above $3 a gallon, people were using less, and when it hit $4 a gallon, people were using a “lot” less, (lot meaning a measurable amount, not a lot in absolute terms).
The advantage of cutting gasoline use is that over time people can recoop these costs by purchasing more efficient cars, and in the short term they can use less gas by driving a little “softer” and by good trip planning.
And by cutting gas use, we will keep the oil prices lower, which is good for the people who use heating oil — which generally costs them a lot more than their annual gasoline costs.
Of course, I have a Prius, so my gas costs are low anyway. I’ll drive around 20,000 miles a year (yes, I moved to where I work, so I don’t have a long commute), which costs me something around $1000 a year if gasoline is $2 a gallon. Some people will spend more than that in the 3-month winter heating season.
Now, maybe we do not want to encourage people to use less gasoline. But if we do want to encourage people to use less gasoline, the best way to do so is to increase the cost of that gasoline.
Eventually, and maybe it will be 2 years, or 10 years, or decades, but eventually gasoline will cost so much that we will find another way to drive our cars. Taxing gasoline may make that happen quicker.
If we apply that gas tax revenue to improving roads, we can save LOTS of gasoline by reducing congestion and improving everybody’s gas mileage. Frankly, I think most people would be willing to pay an extra dollar a gallon if it meant they could save 15 minutes a day on their commute, and get 2mpg more in gas mileage.
In Virginia, we had people spending thousands of dollars extra for hybrids so they could use the HOV lanes.
I don’t think the government should be doing too much to discourage gasoline use. I’m not sure we want to use the tax code for social engineering, although that ship sailed long ago.
The people most in favor a price raising gas tax are those whose lifestyle would be least affected by it. They are ever ready to heap burdens on the backs of others that they do not have to bear.
Can Krauthammer even drive a car? He’s paralyzed, isn’t he?
Or drill for more oil. Duhhh. The more oil and lower demand the lower the price.
Gas taxes should be used to pay for the roads, bridges and anything else out there that relates to transportation both at the state and federal level. Want better roads? Pay for it with a gas tax. Want more money for health and human services? Let it come from somewhere else.
Drill baby drill!
Kraut ought to be careful, Michael Kinsley was promoting the same thing in a recent Time magazine, that I flipped through while trapped at the dentist office. MK was suggesting and offset by lowering the FICA tax:
http://www.time.com/time/magazine/article/0,9171,1865971,00.html
This is pretty much Europe's strategy. They don't have a set floor for gasoline and diesel, but they tax the heck out of it to make it very expensive.
LOL, like the Government isn't going to “tap” the gas tax funds for “General Purpose Use” (read as social welfare programs) just as they are doing now, and have always done.
[Frankly, I think most people would be willing to pay an extra dollar a gallon if it meant they could save 15 minutes a day on their commute, and get 2mpg more in gas mileage.]
I turned 62 this year, and if I had just a nickel for every time I heard about how most people would be willing to pay “just a little ____________ tax to help accomplish _________” (enter your choice of tax and what existing/new Gov't program you want to implement/expand), I would be on a yacht somewhere in the Bahamas.
I'm surprised you left out how it would benefit women and children the most.
I'll stand over here with any other dissenters while you and “most people” rush forward to sign up for more yet more taxes for the Government to waste. BTW, I personally believe "most" FReepers will be standing with the dissenters, while you and any who agree with you step on out.
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