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Timing’s Right for a Net Zero Gasoline Tax?

| Wednesday January 7th, 2009 | 1 Comment

classicoldpickup.jpg The amazingly sharp drop in oil prices – talk about the great risks, and rewards, of investment bubbles and inflationary monetary policy– is providing Americans some welcome relief at the pump. Unfortunately, it’s taken a financial and monetary system collapse and widening, deepening recession for the price of crude to fall so far, so fast.
There are a number of good, solid reasons why the drop in oil prices need not forestall the drive to diversify the U.S. energy base– enhancing national security and putting international relations and foreign policy on much more sound footing not the least among them. And as former Intel CEO Andy Grove points out in a recent article in the McKinsey Quarterly, basing long-term energy policy on short-term fluctuations in fossil fuel prices is a recipe for energy catastrophe.
In a Weekly Standard article, contributing editor Charles Krauthammer argues that Obama and his team have what’s likely to be a short window of opportunity to enact a gasoline tax, something that’s long been anathema to the U.S. public, and considered only somewhat shy of political suicide. Krauthammer offers a revenue neutral twist to the one-sided theme, however, one that makes it more digestible.


A Net-Zero Gasoline Tax
capitolhill.jpg Despite the lofty hopes many are anticipating when the Obama administration gets up and running, it’s difficult to avoid feeling a sense of deja vu when considering the current oil price and economic situation, i.e. the possibility of a repetition of the short-lived rise and fall of efforts to develop, test and put into widespread use a range of renewable energy and clean technology alternatives that occurred in the wake of the OPEC oil crises of the 1970s.
The cultural values and, underlying that, geography that have come to define American “identity” manifest themselves in many ways, defining our attitudes and the way we look ourselves and the world. One instance of this is clearly seen in long and dearly held attitudes towards automobiles, and by association, gas taxes. For politicians, that makes trying to push one through risky business.
The US government levies an 18.4 cent per gallon tax on gasoline. In the EU it approaches $4 per gallon, Krauthammer points out. Clearly, the relative geographies of the land masses these two political entities occupy can explain some of the discrepancy, as can the relative cultural values and trade-offs made by them.
Climate change, environmental degradation, as well as the disassociated political, military, national security and economic costs of our dependence on fossil fuels, foreign oil in particular has more people once again reconsidering our collective love affair with oil.
The recent sustained and sharp rise in oil prices, and the more recent breathtaking fall, Krauthammer argues, makes this an auspicious time for a new administration to push for a “net zero” gasoline tax.
“Net zero” for Krauthammer entails imposing a $1, if not higher, tax on gasoline. In order to take the burden of the common Joe and Jane, he proposes a $14 reduction in withheld FICA taxes.
This package would thereby be “revenue neutral.” It would also put more disposable income into the hands of people who would then be free to spend, or save, it as is their wont. Longer term, it creates an impetus for people to drive less and shift to lower mileage cars, both socially positive, beneficial outcomes.
Sound like a good idea? Check out Krauthammer’s column here.


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  • PapaJack

    This is an out and out fraud. There is no way that the Feds can pay each person for the amount of Fed tax paid and they know it. But that is not the motive anyway. If that was the real motive the easy solution would be to just repeal or otherwise eliminate the present tax. So that obviously is not the motive. If it is to reduce mileage driven that is hogwash. People drive when they need to or have to and will still do so after this crappy move. I can offer a number of other things to prove the fraud that this but this is enough for now.