Suspend federal gasoline tax?
Lab Lemming’s back-of-the-envelope calculation of the effect of a carbon tax on fuel got me thinking about the general issue of taxing transportation fuel.
If you live in the United States, you’ve probably heard some discussion about suspending the federal gasoline tax (18.4 cents/gallon) to help alleviate a slumping economy. The New York Times has an article about it today, which you can read here. The article is mostly about the issue within the context of the two remaining Democratic presidential candidates, Obama and Clinton.
I’m not going to talk about the Democratic race because I think it’s boring. The 24-hour news channels are having so much fun parsing every. single. word. they. say. They’re more interested in “gotcha” journalism and meaningless fluff. I neither have the time nor the brain cells to waste on it. Wake me up after the convention. If anything will be the demise of modern democracy it’ll be mainstream tabloids media, but I digress.
Anyway … back to the federal gasoline tax. It’s original purpose was to provide revenue for highway construction and improvements. It appears to have expanded and become a bit more complex since then, but still meant to be for our public transportation system (which in the U.S. is mostly about roads).
I’m mostly posting to see what you all think. I’m not an economist, I’m not sure what the effects, positive or negative would be. Truckers are definitely hurting with higher fuel prices*. Perhaps suspending the tax, either partially or in full, for commercial truckers but not for regular drivers could work? I’ve said several times in the past that I think the higher fuel prices are good for Americans in the long term. I really think we need a wake-up call regarding our energy usage. But, that’s me … we don’t drive that much, and we have a car with good gas mileage. In other words, I would rather see the tax used for what it was designed for.
Any thoughts?
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* Yes, I know the price of gas in the U.S. still isn’t nearly as much as it is in Europe or other countries … it seems it’s more about the rate of increase that can really wreak havoc.
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Clastic Detritus 
Ummm, I’m actually in favor of jacking our gas taxes (way) up, as a start towards a carbon tax. Yes, it would be really painful in the short-run, but I suspect that within just a few years, you’d see some pretty remarkable changes in our behaviour. I’d also be in favor of putting the revenue from the higher gas taxes into mass transit, telecommuting, mixed use communities, (hell sidewalks!) and other sorts of things that will help people drive less.
But, what about temporary relief for commercial truck drivers? Some of them are saying there whole business is ready to fold.
If their expenses are going up then they should raise prices. It’s not like some trucking company who doesn’t have to pay for gas will undercut them.
Even *if* your only concern is reducing fuel prices, I don’t think it would help much. I would bet (haven’t checked on this yet) that gas prices have increased more than the tax’s $.18 in the last 2 months.
Apparently there were at least a couple large trucker protests in 2005 over the rising cost of fuel – this site. The truckers (independent or not) get paid by contract by the companies hiring them, and the issue is that their mileage rate should be increased to reflect current prices. That way, we would all pay equally for the increase in trucking costs. It doesn’t necessarily have to be done by governmental order, unless companies hiring truckers don’t do it – which I suspect they will have to if it gets enough press.
As for highway/fuel taxes being lowered – well, that seems a little strange to me.
Woops on all the blue print! At least the site did go through!
I have to agree with science woman… Pretend you are a drug addict. You are breaking into cars to support your habit. The price of drugs goes up (typical drug dealers always trying to turn a profit). The solution is not to get more drugs locally, not to lower the price of drugs slightly by packing them in cheaper bags, or even switching to a different drug, made from corn. The real solution is to stop using drugs in the first place. Yes you will get sick and sweaty, maybe even see a baby crawling on the ceiling. But in the long run, you will feel better.
Stop burning oil and coal. That helps with the terrorist problem, the global warming problem, the air quality problems, and will save us money in the long run. We need to be using electric, hydrogen, and natural gas cars. We need to live in more efficient buildings, conserve and recycle, and start to slow our population growth. We need leaders who are willing to say the right thing, no matter how much that may hurt their election chances. We also need the public to learn science so that they understand these issues.
I agree with all the big-picture things people are saying … no doubt. At the same time, I’m trying to connect all the “we need to do this, we need to do that” statements with what has been done, what’s happening now, and what is proposed more specifically.
Personally, I don’t think this tax-suspension plan will do much … it seems to be more of a way for a politician to say “see, I don’t like taxes, vote for me”. But, perhaps those who actually deal with these kinds of complex economic scenarios have a different opinion.
Brian, I think you are probably right about it being mostly or entirely a political thing – and if the taxes are as low as $0.184 per gallon, I’m not sure that it would have a very large impact on people to even eliminate them entirely. I think that’s about 5% or so?
For people who drive a lot, that might be significant; for most people, a drop from $3.62/gal to $3.44/gal – well, the price will still seem high, and if you own a pickup truck with a 30-gallon tank, you still won’t be able to fill it up without crossing the $75.00 limit that so many gas stations here have. (I’m using local Nevada prices and limits).
As for the details of who is proposing what and who is doing what and what has actually been done – I, too, often have a hard time keeping up on that.
Brian,
If the truckers folding means increased rail transport, isn’t that good for everyone whop isn’t behind the wheel?
Alternatively, if the inefficient 30% of truckers fold, then the demand/supply ratio for transport will increase, and the remaining efficient truckers will be able to charge higher prices.
Suspending taxes is odd, as trucks do most of the damage to the highways.
A more humane solution, however, would be to invest some of that highway money into high efficiency commercial vehicle development. A hybrid delivery truck with regenerative breaking would save everybody lots of pollution/ carbon/ money etc.
Lab Lemming … I like your last comment, that makes a lot of sense.
In line with the general tone of the comments above, here’s a quote from the ATA (American Truckers Assoc.) about this proposal:
“ATA appreciates the effort and supports the proposals. But we do have concerns that any fuel tax suspension proposal could damage the already ailing Highway Trust Fund. To the extent that McCain and Snowe’s proposals use general revenue funds to offset the hit to the trust fund, that concern is addressed. ATA did not ask for this legislation. And we believe it is only a very short term answer that does not do anything to address the longer term issue of rising fuel prices. ATA recognizes that rising fuel costs have a disproportionate impact on small trucking companies where even a small savings can be the difference in their staying in business.”
This position is the most favorable, by far, and is still tepid at best. Find this quote and more from this article.
I’m actually a big fan of increased rail transport.