February 9, 2007

KEEP THE MARKET FREE, BUT MAKE GAS EXPENSIVE:

Is It Time for a New Tax on Energy?: Economists Say Government Should Foster Alternatives - But Not How Bush Proposes (PHIL IZZO, February 9, 2007, Wall Street Journal)

The government should encourage development of alternatives to fossil fuels, economists said in a WSJ.com survey. But most say the best way to do that isn't in President Bush's energy proposals: a new tax on fossil fuels.

Forty of 47 economists who answered the question said the government should help champion alternative fuels. Economists generally are in favor of free-market solutions, but there are times when you need to intervene," said David Wyss at Standard & Poor's Corp. "We're already in the danger zone" because of the outlook for oil supplies and concerns about climate change, he said.

A majority of the economists said a tax on fossil fuels would be the most economically sound way to encourage alternatives. A tax would raise the price of fossil fuels and make alternatives, which today often are more costly to produce, more competitive in the consumer market. "A tax puts pressure on the market, rather than forcing an artificial solution on it," said Mr. Wyss.


Posted by Orrin Judd at February 9, 2007 2:03 PM
Comments

Anecdotal evidence, surely, but I spent a lot of time in England the last year. Recall seeing few, if any, hybrids or alternative fuel vehicles there. And I paid close attention to what people were driving. With gas (and diesel) prices I am estimating at $7 to $8 per gallon equivalent, I wonder just how high those prices have to be to make a difference.

OJ, when I recall all your comments regarding science, I cannot help but chuckle at your using economists of all people to buttress your argument.

Posted by: Rick T. at February 9, 2007 2:29 PM

Not only a tax on the poor, who drive older cars, but even a tax settled on the working poor, who use those cars to get to their jobs.

Posted by: Lou Gots at February 9, 2007 2:32 PM

The long-term solution isn't found in punishing gas users [poor, rich or otherwise] for consuming the stuff. The solution is in REWARDING exploration and innovation of viable alternatives. And please, OJ, spare me the usual "if taxes are high enough, then using less is its own reward . . . " nonsense.

Posted by: JR at February 9, 2007 2:40 PM

The point is to punish consumption. We don't want exploration.

Posted by: oj at February 9, 2007 2:48 PM

Rick:

The higher we can drive it before changing behavior the better.

Posted by: oj at February 9, 2007 2:52 PM

Lou, JR:

Certainly, coupling it with an offsetting increase in the standard deduction would be appropriate. But no scheme will solve the problem as efficient as these higher prices - which may have to be high indeed; we're a rich people and value our large powerful cars highly, as the European experience shows.

Want to reward those with gas alternatives? Guarentee them a high price, by taxing gas. Any other scheme assures perverse results at just as high a cost.

Posted by: Mike Earl at February 9, 2007 4:41 PM

If the Federal government was funded through consumption taxes in general then it would make sense. Income taxes only have the effect of taxing the taxes. Very tough on low, middle income folks particularly in the high tax states. The additional tax is still 'income' after all.

Posted by: Tom C at February 9, 2007 5:02 PM

The idea that taxes taken at the gas pump will somehow get reimbursed back to the States, Counties, Cities and the people under the guise of alternative energy in the near future, is laughable. Out here in Cali, we still don't get our fair share of tax redistribution and it's been like that, oh for about 100 years.

Posted by: KRS at February 9, 2007 5:47 PM

Tom took the post right out of my keyboard.

Mike: a correlative offset indeed. Who's actually proposing that though?

I realize this is one of those "principal" arguments that generally gets no traction here, but the idea of a huge gas tax increase almost sounds like there'd be EVEN MORE MONEY [and thus power] concentrated in Washington D.C.

I know, I know . . . . this is totally different than other taxes because a) it's for our own good b) Bureaucrats will magically obtain market-like efficiency with THESE tax $'s and c) you know you're just going to pay the higher price and keep driving your gas-guzzling F150 anyway so quit whining!

Posted by: JR at February 9, 2007 5:58 PM

JR:

Everyone. One point of consumption taxes is that they'll replace income taxes.

Posted by: oj at February 9, 2007 7:11 PM

KRS:

It won't. Why would it? California can raise gas taxes itself if it wants.

Posted by: oj at February 9, 2007 7:13 PM
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