June 21, 2006
TAXES, NOT SUBSIDIES:
An Ear for the Market (DAVID MORRIS, 6/21/06, NY Times)
CONGRESS is considering several bills to extend the 51-cent-per-gallon tax credit for ethanol producers beyond its 2010 expiration date. But let's hope that our elected representatives don't make their decision in the grips of an ethanol haze. The state of the ethanol industry changed so substantially since the last extension, one year ago, that a fundamental and clearheaded redesign is in order. [...]Last year, Congress ordered a near doubling of ethanol sales by 2012. Industry has responded so rapidly that the nation may have enough capacity to meet the Congressional goal by 2008. Indeed, Congress is already debating measures to increase mandated levels to 10 billion gallons in 2010 and 30 billion in 2020.
If the current 51-cent-per-gallon tax credit remains in place, these mandates would cost the Treasury Department $5 billion in 2010 and more than $15 billion in 2020. In the face of high oil prices, such subsidy levels are likely to prove politically untenable when there's no need for tax credits to make ethanol competitive.
Rather than favor one alternative, ethanol, which almost certainly won't turn out to be the best one, Congress should just disfavor what it's trying to reduce our consumption of, gas, and do it via increased taxes. Posted by Orrin Judd at June 21, 2006 10:03 AM
Well, it's all academic since this won't ever happen, but the tax you propose is certainly not the best way to go. For one thing, it unfairly punishes people trapped in long commutes. For another, it would discourage people from driving to the store to buy stuff, which is at the heart of 60% of the economic activity in this country.
A better solution would be to tax the anticipated consumption of gas at the point of sale of a car or truck, with some fee based on the mpg multiplied by the estimated lifetime mileage of the vehicle. You could even make it revenue neutral by applying it on a sliding scale, and making it a negative tax (i.e. a rebate) on higher efficiency vehicles.
And while we're at it, I'd like a pony for Christmas, too.
Posted by: HT at June 21, 2006 10:41 AMHT,
You're kidding, right?
Though I'd only get on board a gas tax that replaces income taxes (or as a bargaining chip for Personal Accounts), it's hard to argue with its efficiency.
Further, why not "punish" long commutes? People might spend more time cleaning up their current community over running away to become "Patio Man" in "Sprinkler City."
With the economy doing pretty well with the latest run-up, arguing that a 50 cent tax on gas will dry up shopping is pretty thin.
If we are going to engage in social engineering, a gas tax is pretty easy way to do it.
Posted by: Bruno at June 21, 2006 10:49 AMKidding? About the pony, yes.
As for the rest, we are talking about the best way to affect marginal behavior. I think my suggestion would be more effective and less burdensome on the economy than an increase in the gas tax. Plus my plan would actually provide incentives for "better" behavior (i.e. rebates for high mpg vehicles).
In any case, the proverbial snowball's chance is what either option has for ever seeing the light of day.
Agreed. Moreover, according to some ethanol is already economically sustainable without subsidy ... which tells you the question of susidizing ethanol has very little to do with energy and environmental policy and a whole lot to do with the farm lobby.
Posted by: Michael Van Winkle at June 21, 2006 11:16 AMAgreed. Moreover, according to some ethanol is already economically sustainable without subsidy ... which tells you the question of susidizing ethanol has very little to do with energy and environmental policy and a whole lot to do with the farm lobby.
Posted by: Michael Van Winkle at June 21, 2006 11:20 AMThat's who we want to punish--the consumers of gasoline.
Posted by: oj at June 21, 2006 11:47 AMOJ: I agree, or at least I'm willing to pretend that I do for the purposes of this discussion.
Although I think the real purpose is to encourage desired behavior, rather than merely to spank people for misbehaving. I am certain, however, that it would be more effective to prod the driving public when they make the choice about the rate at which they will consume gasoline (i.e. mpg) rather than at the point where they are making the (possibly involuntary) decision to drive somewhere. One stands a reasonable chance of affecting marginal behavior, while the other merely rakes in additional dough to the Federal coffers (not in and of itself a worthy end, in my opinion).
Objectively, the idiot who drives a Hummer to the store to buy a doughnut deserves more opprobrium than the person who drives a Honda Civic for the same nefarious purpose. So let them pay for their stupidity/cupidity up front, rather than on a paygo basis.
Posted by: HT at June 21, 2006 12:03 PMIf burning soccer balls would fuel a car but t'd only get 2mpg what do we care? The point is to reduce gasoline consumption.
Posted by: oj at June 21, 2006 12:08 PMI like your new plan! It has the additional benefit of (1) reducing soccer and (2) reducing the number of soccer moms lumbering around in their Suburbans. A veritable hecatomb among the bird population, and all with a single stone!
Unless the make soccer balls with petroleum. Which, I don't know, do they?
Nah, they're made of bile.
Posted by: oj at June 21, 2006 12:34 PMEeew.
Posted by: HT at June 21, 2006 12:38 PMThis is somewhat related. This is all about farm (corn) subsidies. Last week, I ordered a corn burning stove. What the h*ll, if the government is going to subsidize it, what not use it. I'll be able to get some of my tax money back, heating the house. Who cares if the train is heated.
Posted by: AllenS at June 21, 2006 1:44 PMYou can't forget the sugar subsidies and tariffs. Sugar ethanol might well be cost-effective, but we make sugar too expensive here, and add a tariff when importing sugar ethanol. (Since it would be cheaper than corn.)