In a recent column in the Washington Post, Krauthammer argues that this is the perfect time to raise the gas tax.
His idea is to take advantage of the lower gas prices right now to raise taxes on gas by $1 and then give the money back to taxpayers in the form of cutting payroll taxes.
Under this plan someone driving a Prius would save money and someone driving a gas guzzling SUV would pay more. But they still would be paying less at the pump than a couple of years ago. (Until gas prices inevitably rise again.)
It would be revenue neutral.
It would give consumers more control over the tax hit. You can’t do anything to avoid a payroll tax except not work. You can avoid gas taxes by buying a fuel efficient car.
It would benefit the environment.
It would cut demand for oil, which is good for the US and bad for Iran and others.
It would raise prices and put a substantial dent in a still-tentative economic recovery, and it would disproportionately affect lower-income households (though not as badly as other consumption taxes.)
I am wholly in favor of a gradual gas tax hike to bring us closer to parity with other developed states (the UK is currently seeing prices at a three-year low of $5.84/gal.)
It’s a much more visible tax than payroll tax, so people will hate it.
It will adversely affect those that have to drive a lot for their jobs (Do truck drivers and taxi drivers pay for gas out of pocket?). Making it harder for commuters that don’t have a choice in working from home seems like a poor decision.
And it’s self-defeating. More people will use this as a reason to move to hybrids and electrics, which might be nice, but then it will no longer be revenue neutral and we’ll just have to up the payroll tax again.
Plus, and correct me if I’m wrong, but aren’t most gas taxes used for road repair, not general budget? This makes the idea of changing payroll taxes to offset it robbing peter to pay paul. Again, until we move to electrics, and then the revenue for road repair goes in the toilet.
Where I live, nearly all of the roads are maintained, depending on the road, by the city, township, or county, all of which are funded by local taxes, not the federal gas tax.
I oppose raising the gas tax because it is a regressive tax. It takes a larger chunk out of poorer people’s income, and poorer people often have to travel longer distances for employment.
Yes I agree that it would hit the poorer, and the least able to avoid it by buying a Prius, disproportionately.
I would like to see it abolished all together, perhaps replaced by a FICA increase. And as you said in the OP, that would also equally qualify in your eyes as ‘revenue neutral’.
So let me get this straight…Krauthammer wants to take $1 that we already have in our pockets, send it to Washington to be handled by a bunch of bureaucrats just so they can give it back to us (at probably $0.60 cents on the dollar)?
No, his proposal is to let you keep more of your wages up front, by reducing the FICA tax coming out of your paycheck. Whether or not you spend it on gas is up to you. What’s not to like?
This, and I’m surprised that anyone who’s concerned about global warming would feel differently. Four years ago Istarted a thread wondering how other countries managed to get their high gas taxes passed in the first place, given how politically unpopular it must have been. Now that gas is really low, it should be time to at least take a shot at implementing some real taxes to reduce consumption. When gas was 5 bucks a gallon we started to see some real changes in consumer habits. And then gas started to get cheap again and it all evaporated. I’d like to see a dollar a year increase until the tax is somewhere around $5 to $7 a gallon, with similar taxes on fuel oil, natural gas, and coal-powered electricity. But I’m not holding my breath.
People in this country have a tax allergy. You mention taxes and they go into anaphylactic shock.
I’m more in favor of a gradual increase in the tax rather than a one time hit, allowing people to adjust to the tax by changing their behaviors, the type of car they drive, etc. These things don’t happen instantly, so giving people a few years to adjust is sensible.
Gas demand tends to be relatively inelastic in the short run; in the longer run, people do consider gas cost when replacing cars so demand becomes more elastic.
Those most affected in their budgeting (the poor) tend to also drive the oldest cars and have little capability to buy new more fuel efficient vehicles. Those with the most capability to upgrade for fuel efficiency are the least affected as a percentage of income.
Revenue neutral now probably means a net loss in tax dollars over a span of a couple years as demand does start to shift.
What’s to love?
I do support a smaller raise to fund required interstate and bridge repair. Index it to the CPI and leave it on autopilot.
I can’t believe I’m agreeing with Krauthammer, to the extent that I suspect he is up to some sort of underhanded shenanigans that I’m not noticing–but until I figure out what they are, I’ve got two very tentative thumbs-up for the proposal.
I would be OK with raising the gas tax when prices are low, like they are now, but only if these same taxes are reduced when - as they inevitably will - gas prices go back up. What do you think the chances are of the politicians doing this?
The point of a gas tax is not to keep prices static – if that were the case, consumer demand would no longer drive gas prices and oil companies would fix the price at whatever value resulted in the lowest taxes (and the most profit for themselves). If we implement a $5/gal tax now and then gas goes up in price $5, we’ll just have $12/gal gas. That oughta really discourage use. It’s a feature, not a bug.
I’m less than impressed with the cries of woe, considering that gas prices have declined over $1.50 around here and people were surviving at $4 a gallon.
Let’s put some smaller increase to infrastructure repair, which benefits exactly the people paying the gas tax and which can be throttled depending on revenue.
Another advantage is that higher prices drive fuel efficiency. In California our high prices have led to massive numbers of Priuses on the road, and an increasing number of electric cars and plug-in hybrids. So much so that they are talking about a mileage tax to replace or augment the gas tax to get road money from those of us who have stopped buying a lot of gas.
I can see the gas tax going back down. I can’t see the payroll tax going back up, so Krauthammer’s plan is really a way to create more structural deficits which will be an excuse for reducing spending. Which would be the real regressive part.
Except that the people an increased gas tax would harm most, are the ones who can’t just decide to go out and spend $25,000 to $35,000 for a more efficient vehicle. They’re the ones who already don’t buy lattes every day, which they can cut out to make up for the higher cost of going to and from work. Assuming they buy the average amount of gas, the tax will cost them $50 per month. Fifty dollars a month might not be a great amount of money to you or me, but for many people it might be a week’s worth of groceries. Since lower-income workers often need to travel greater distances to their jobs (for example, how many maids live in Beverly Hills?), the burden on them might be greater than average. If the choice is to be able to go to work, or to feed your kids, then there might be more people signing up for public assistance – which would not be revenue-neutral.