September 13, 2012

TAX WHAT YOU DON'T WANT:

Taxes Show One Way to Save Fuel (EDUARDO PORTER, 9/12/12, NY Times)

Consider how a gas tax would work. Because it would make gas more expensive at the pump, we would drive less. When time came to replace the old family S.U.V., we would be more likely to consider a more fuel-efficient option. As more Americans sought gas-sipping hybrids, carmakers would develop more efficient vehicles.

This is not theory. We've seen it happen. In 2008, when the price of gas shot abruptly past $4 a gallon, Americans cut back sharply on their driving. Total miles driven on American highways declined for the first time since 1980 and gas use fell more than 4 percent. General Motors ditched the Hummer, and gas-guzzling pickups were briefly dislodged from the perch they had occupied since 1992 as the nation's most popular light vehicle.

Driving levels started creeping back up as soon as gas prices started receding, but a gas tax would be permanent and would lead to even bigger changes in habits. And the cost is lower than it seems. Economists point out that the energy savings would not change if the government returned all the revenue raised by a gas tax to Americans -- perhaps through rebates for low-income people who spend a bigger share of their money on gas.

The weakness with the fuel-economy rules is that they don't affect people's behavior the way higher gas prices do. They apply only to new vehicles -- not the ones on the road now -- so it takes quite a long time to alter our overall gas use. And they carry perverse incentives: because new vehicles go farther on a gallon of gas, they give us a reason to drive more, leading to more congestion, accidents, pollution and gas consumption.

The incentives to carmakers can also be weird. The original standards for fuel economy in the 1970s exempted light trucks, which were a small share of the market. That decision was critical to the explosive growth of the S.U.V. In 1973, light trucks amounted to 3 percent of new vehicle sales. Today they account for half.

Who knows what distortions the new rules will bring? The standards vary according to the footprint of the car -- the length between the axles multiplied by the width. So maybe cars will be boxier in the future.

Automakers will make the most efficient cars they can that customers will buy. A gas tax that goads drivers to choose gas-sippers takes advantage of this fact. A mileage standard does not.


Posted by at September 13, 2012 5:17 AM
  

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