Why the Gas Tax Should Be RAISED

The price of a barrel of oil has been hitting record highs near $130 recently and gas prices couldn’t be higher(or could they). People claim there is global warming and it is being caused by the world’s dependency on oil and other fossil fuels. Politicians are telling us that they are doing everything they can to try to help Americans lower their gas bills. Well I don’t believe them! There is a simple solution to the problem but they are afraid to enact it because the public might not understand it and for heaven sakes not re-elect them. Well here is the solution: Raise the Gas Tax! Before you call me crazy and leave my site at least hear out the plan

My Plan:

The tax on a gallon of gasoline would be raised $2-3.00 over the course of 3 years. This will give people time to start looking for more efficient cars if they want them and businesses time to find more efficient ways to transport goods etc.

All extra funds raised from this new gas tax would be returned to lower and middle income families in the form of rebate check. This would more than pay for any increase in gas price felt at the pump or when shopping (because the increased cost of transporting goods would probably increase the price of everything slightly).

The benefits:

1) Decreased dependence on foreign oil – Every time you fill up your tank of gas, you are essentially handing over part of your paycheck to foreign countries you probably don’t even like. Increasing the price will lower demand causing the price that the Petroleum Exporting Countries get to go down. This is what we want!

2) Good for the environment – Since the price of gas is so expensive now, people will start driving less and start buying more fuel efficient cars. This will be great for the environment. It will mean less greenhouse gases and cleaner smog-free cities

3) Another Robin Hood tax – Everyone seems to hate the rich, well this is your opportunity to take their money and give it to the people who need it more. Increased fuel prices will increase the price of everything. Since rich people buy more stuff, they will be paying for more of this increase than us common folk. The poor and middle class people will get this money back in the form of rebates so we will probably make money out of the whole thing!

4) Cause innovation – To increase efficiency and use less on fuel, we will need newer and better technologies. Necessity is the mother of all invention. The reason changes haven’t happened faster is because we haven’t needed them. Gas hasn’t been too expensive yet.

5) Creates new jobs– Well someone has to be innovating for #4. That will mean more jobs(the high paying kind). We will need engineers and entrepreneurs to solve these problems which is good for us Americans(harder to outsource).

European countries have done this long ago and it is working out great for them. Their gas prices are upwards of $7 a gallon in some places. They all drive smaller, more efficient cars and have better public transportation. It is time America joins the bandwagon and helps solve this problem. Better late than never.

Many times people are unable to manage in the car loans or worse, the student loans they are offered. As a result they start getting cheap loans. IF not paid on time, they can be converted into a bad credit loan.

15 Comments

  1. […] David wrote an interesting post today on Why the Gas Tax Should Be RAISEDHere’s a quick excerptAll extra funds raised from this new gas tax would be returned to lower and middle income families in the form of rebate check. This would more than pay for any increase in gas price felt at the pump or when shopping (because the … […]

  2. This is an interesting idea. However, I think that price increase would run most trucking and logistics companies out of business. And cab and limo drivers would also see their income drop to almost nothing. Or it would cause prices to skyrocket.

    Yes, it would force us to be innovative though and start finding alternative energy sources!

  3. Yes this would affect all drivers, but eventually I feel it has to change. We can’t keep going like we are forever. I don’t want a sudden shock, that is why I proposed doing it over a 3 year period. If you wanna see people move, sometimes you just have to light a fire under them.

  4. David, I began writing this huge huge reply to this posting and realized that I find why people won’t impose a tax on gas. There are so many short term negatives associated with your Long term goal. I’ll just tackle your statements one by one:

    “1,2,3”

    An increase of oil prices at the pump would certainly decrease demand and would certainly have individuals like myself look for other methods of transportation! This would definitely be good for environment! But on 3. If you return money to the poor you would most likely encourage the lesser classes to spend on the gas since they’re getting money back anyways! Giving money back to the lower classes actually fuels demand. If the prices are higher and the supply stays the same (assuming new classical theory of rational expectations over the three years) then the prices would go up but supply stays the same. You aren’t really changing anything except the price. I believe you would actually be hurting local domestic oil producers and encouraging the US to buy from foreign companies who might be able to better compete in the US market against companies in our country. Gosh there is so much more to this than I can explain, I feel.

    Now, for 4,5:

    The short term affect would probably halt production which would then heighten the unemployment rate. If unemployment goes up, you are talking about everyone in the economy knowing that the biggest industry has just fired a whole lot of people, and then you would essentially causing disaster. We are too dependent on oil dude!

    However, if we took a proactive approach in increasing laws to help the environment. You might receive the environmental affect you desired and also the overall enforcement of clean air and environment friendly cars. I believe the US is currently doing that and that the further we get in technology the closer we get to accomplishing all 5 of your goals. The trick is to make it tough for people to depend solely on oil and simultaneously allow for companies to explore other sorts of fuel and innovative ways of becoming less and less dependent of oil.

    If the above is achieved, then you would lower Aggregate Demand and hence lower the prices of oil and perhaps the prices of many other things dependent on oil as well. Would you not like a world less dependent of oil and more dependent on other more healthy forms of fuels? In the end, the price of oil goes down, the prices of goods and service can and might decrease and I believe that our dollar might even raise in value! Seeing as it might be more cost efficient to manufacture at home :D. Ultimately, the business world rewards growth, and because they reward growth they don’t acknowledge when they need to stop and make sure they are doing the right thing for the customers’ and the environment.

    Increase laws that will allow for further research in ethanol as a form of fuel! Gosh that would be great!

  5. Wow Tony thanks for the response, I think that comment was longer than the original post, lol.

    I do however have to disagree with you on a few points.
    1) You seem to think that raising the price 2 years over 3 years would be a huge shock to the system. Well I just look up the price of gas 3 years ago and it was around $2/gallon. That means it went up 2 dollars over 3 years like I am planning.

    2) Kinda goes with #1 but: you said in the short term it would halt production. Umm. would people stop going to work? Would food not get shipped to the grocery store? We still need a lot of gas.

    3) About the poor just spending their rebates on more gas. Let me give you a hypothetical. If you were poor and gas cost $1000/gallon but the government would give you back enough money so that the gas was essentially free for how much gas you currently use, would you keep using the car that gets 15mpg? Heck no, you would buy a prius and bank or spend all that extra cash you got. By increasing the price and giving rebates, it encourages the poor and middle class to buy more fuel efficient cars.

    Thanks again for the comment I really do appreciate it. We could probably debate this topic for hours. I hope you are not offended, I love a good debate, I am just telling you what I think. I am not telling you that you are wrong.

  6. It looks like we have one more thing in common. I wrote a post called “Increase the Gas Tax” last month. You did a much better job at articulating why it should be increased though.

  7. When I meant halt the Production I meant reduce Aggregate Output/Income (over all gross domestic product — production). Meaning if you have a price Rise it is technically a price shock, As you might have known, over the last few years the price has definitely gone up. Has consumption? No has the rise in purchases of hybrid vehicles? Of course! If you haven’t noticed, there have been layoffs in both the Oil and Automobile industry, the biggest in the near past was Cyrslar!

    But lets not blaim the price shock, blame the dollar inflation. If Government should be doing anything is to try and stop diluting the dollar! The Fed started off bad by trying to help with the “recession.” They should have left it like it was. Americans need a good spankin from their poor spending/expenditure habits! I know if anyone, you could agree to this…That America has become a nation of cosumers and also the leading nation in consumerism!

    The assuming that rebates to the public would halt production makes sense and that is where your Classic Thoery thought comes into affect. You assume that people will expacte prices to go up and hence buy fuel efficient cars to meet the hikes. People are doing that now and I belive that what you say is partially true. Not everyone in the economy will then buy a fuel efficiet car. You can see this in the break up of CPI. The Biggest expenses in a house are First (Housing), Secondly (Food and Beverages) and thirdly (Transportation).

    Now if you think people are looking to save the rebates, then you are mistaken. The current Savings rate in America for the last few years has been, guess…. A BIG FAT ZERO Percent.

    Keynsian thought would suggest that Giving money to the people will do what?
    Push out Demand, raise prices and cause inflation.

    The Fed lowering the rate and the Gov sending out the stimulus pack has caused exactly this. They have saved us from Recession, i think, but at a cost of inflation.

    I wasn’t disagreeing with you, but a lot more has to happen the a raise in gas tax and hence gas prices to get the results you are looking for ultimately. Reducation in Demand for Gas is unlikely as you mentioned in your comment reply, Things still have to be shipped, people still have to drive, but we the people are but a small part of the economy, especially when it comes to oil.

    😀 I think i wrote a lot more again … sorry.

  8. Sorry forgot one thing, We the people are a small part but yet we are everything aren’t we? 😀

  9. Man, this is crazy! Oil Supply problem!

    This is nut! The price of crude up 39 percent this year. This is the biggest volatility I’ve seen. A lot of people don’t have the right picture. This is driven by demand globally. although there is a lowered demand in the US. There are other places in the the East. This Earthquake is demanding a ton of oil. Increasing Deman even more in a very tight market! Geopolitical have cut down OPIC and non OPIC producation. We are seeing Demand exceeding Supply, that is going to get wider and wider. Its that simple. We have seen prices to the perception of what will continue to happen. The perception that the world will have a supply problem with oil.

    The days of cheap oil are over! Seeing 150 a barrell is completely possible in my mind. Three billion consumer are in the market place competing for oil. The US not the engine that we see has driven demand. If US slows down, other countries seem to take up the slack!

    Respectfully,
    Tony Tovar

  10. There is no need to raise the gas tax. People will respond on their own to supply and demand.

    Taxes and government intervention are inferior to supply/demand.

    I read somewhere that it takes about 2 years for changed consumer behavior to influence the price of a barrel of oil, so we won’t know how people react to $4/gallon gas until then.

    If they did raise the gas tax, the rebate is a bad idea.

    A gas tax affects lower income people more than wealthier people, so they should make it revenue neutral by cutting other taxes that also hurt lower income people more (such as sales taxes).

    In the case of the federal government, there is no sales tax, but they could increase the standard deduction and child credits – since these affect lower income people more.

    Also, local governments will then have to allow cab drivers to raise their rates – or charge a fuel surcharge when gas is above a certain price.

  11. Praveen, thank you for your comment but I have to disagree with what you said. You kind of just state things that you think are true but don’t back them up. The goal was to reduce dependency on foreign oil. Giving people more money in the form of regular deductions will not do this. Charging more on gas will cause people to change their habits as we have seen this already by the price of oil going up on its own. I know my idea isn’t perfect and there are flaws in them, but you didn’t seem to be able to pick any of them out.

  12. […] Carter presents Why the Gas Tax Should Be RAISED posted at David Makes Cents.com, saying, that this post “Goes over the positive effects […]

  13. Innovation drives invention; you’re certainly thinking on the right path with this one and I agree that something needs to be done. I’d think that they government would see the same thing. I’m no political professional by ANY stretch of the imagination, but I DO read that Bush and Halliburton are fairly good buddies. Gas prices are a big thing on everyones mind and the Democrats are certainly banking on those as pros for their side in the election. Hopefully they’ll be able to do something with it come game time…

  14. Even ignoring the completely asinine premise that increasing taxes on gas in the U.S. would decrease demand significantly on a global scale as countries like China and India continue to increase consumption, there’s no reason to believe that politicians who raise gas taxes would turn around and give it to the poor as a “rebate.” More likely, they will use it to show that they “balanced” the budget, or they’ll just spend it on pet projects like they do now.

    Also, the claim that only rich people will suffer (or that they will suffer the most) is ridiculous. Lower and middle-class people will suffer more, since they will have to turn higher-paying jobs that are a little further away because the higher price of gas will make it not worthwhile. Even if they do get “rebates,” lower and middle class people will have to eat the higher cost until they get their checks, which is likely to mean they’ll have to use credit cards or other unsavory means, garnering interest.

    The best way to solve the crisis is to lower taxes on gas to help people immediately, and then eliminate taxes on ALL forms of alternative energy research and development (not just the “preferred” methods like ethanol) so that entrepreneurs can innovate without hassle.

  15. Curtis thanks for your comment, but I would have to disagree with some of you thoughts.

    1) Yes , maybe the politicians wouldn’t give the rebates to lower income people, but thats how I would set up the law. If the politicians decided to do something else, well then, thats not my plan and there is nothing I could do about it.

    2) There is no saying that the government only has to give the rebates weekly. They could give every1 a gas card (or debit card) that they put money on every week or so. That way the poor don’t have to eat it. Since all the money goes back to the poor and middle class, it isn’t possible for the poor to suffer(as they are getting back all the money). The rich probably don’t suffer b/c they are rich but they are paying for it.

    3) Your way doesn’t work. Well not fast enough. You said eliminate the tax on “preferred methods”. Well news flash, they are GIVING money to people who make these products and technology to make it more competitive but it still IS NOT! Eventually prices will go down on these new technologies but I feel it is happening too slow.

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