January 9, 2015

WE ARE ALL NEOCONOMISTS NOW:

Raise the gas tax. A lot.  (Charles Krauthammer, 1/08/15, Washinton Post)

The average American buys about 12 gallons of gas a week. Washington would be soaking him for $12 in extra taxes. Washington should therefore simultaneously reduce everyone's FICA tax by $12 a week. Thus the average driver is left harmless. He receives a $12-per-week FICA bonus that he can spend on gasoline if he wants -- or anything else. If he chooses to drive less, it puts money in his pocket. (The unemployed would have the $12 added to their unemployment insurance; the elderly, to their Social Security check.)

The point of the $1 gas tax increase is not to feed the maw of a government raking in $3 trillion a year. The point is exclusively to alter incentives -- to reduce the disincentive for work (the Social Security tax) and to increase the disincentive to consume gasoline.

It's win-win. Employment taxes are a drag on job creation. Reducing them not only promotes growth but advances fairness, FICA being a regressive tax that hits the middle and working classes far more than the rich.

As for oil, we remain the world champion consumer. We burn more than 20 percent of global output, almost twice as much as the next nearest gas guzzler, China.

A $1 gas tax increase would constrain oil consumption in two ways. In the short run, by curbing driving. In the long run, by altering car-buying habits. A return to gas-guzzling land yachts occurs every time gasoline prices plunge. A high gas tax encourages demand for more fuel-efficient vehicles. Constrained U.S. consumption -- combined with already huge increases in U.S. production -- would continue to apply enormous downward pressure on oil prices.

A tax is the best way to improve fuel efficiency.

Posted by at January 9, 2015 4:49 PM
  

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