gas taxes
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The new auto fuel-efficiency standards — going beyond the headlines
On My 19th, 2009, President Obama announced new Federal fuel-efficiency standards for motor-vehicles that would make the current standards — known as Corporate Average Fuel Economy — or CAFE — standards significantly more stringent. These CAFE standards measure compliance as the average of a company’s entire fleet of cars, and so are more flexible and […]
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Myth: Unlike cap-and-trade, a carbon tax is simple, immune to manipulation, & politically palatable
A strange-bedfellows political coalition, everyone from the CEO of Exxon to climate scientist James Hansen, supports a carbon tax as an alternative to cap-and-trade. Tax proponents allege that cap-and-trade is too complicated; too friendly to financial industry tricks and manipulations; too open to loopholes, cheating, and special pleading; too weak to work. This is all […]
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Oregon’s successful mileage tax experiment worked smoothly — and helped curb congestion
Recently I’ve been flogging the concept of a mileage tax, a system of per-mile road usage fees that over time can replace our dysfunctional gasoline tax as a way of funding transportation infrastructure. Although people have raised a lot of interesting objections, I’d like for now to skip ahead and simply describe Oregon’s successful experiment […]
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Let’s call a gas tax the ‘All-American Energy-Independence Assessment’
Whether they are called “revenue enhancements” or “user charges,” fear of the political consequences of taxes restricts debate on energy and environmental policy options in Washington. In a March 7 post on “green jobs,” in which I argued that it is not always best to try to address two challenges with a single policy instrument, […]
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Whatever its virtues, the gas tax is nearing the end of its life
The post on the mileage tax stirred up a lot of reaction, much of it negative. As it happens, the state of Oregon recently wrapped up a successful trial of a mileage tax system, so for the next few posts I’m going to be relying heavily on an excellent final report on the system (PDF) […]
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A mileage tax may be the best idea that everyone loves to hate
This sort of flew under the radar, but a few weeks ago a federal commission floated the idea of eventually replacing the gas tax with a tax based on the number of miles driven each year. What happened next was odd: progressives, conservatives, and wonks banded together to proclaim a mileage tax to be a stupid idea.
A mileage tax is not a stupid idea. It may prove to be unworkable for technical, political, or even cultural reasons, but at root a mileage tax is both a very good idea and also possibly a necessary one as we undertake a shift away from the internal combustion engine. It's no surprise to see politicians (like Obama) run screaming from this proposal, but why are the pundits piling on?
Before delving into the specific arguments for and against a mileage tax, it's worth noting that the entire country of Holland is doing exactly what commentators have deemed stupid or impossible: starting in 2011, the Netherlands will phase in a vehicle-tracking scheme that applies dynamic pricing to every mile driven. Pricing will vary by vehicle type, time of day, and location, in order to curb both congestion and carbon emissions. The program is designed to be revenue-neutral, and because the government is simultaneously phasing out a steep motor vehicle tax, the plan should end up reducing the burden on low-income drivers. I mention this not to suggest that the U.S. can or should do exactly as Holland does, but just to point out that the concept isn't quite as crazily unworkable as some seem to think.
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A price signal in the vehicle market is best applied to the vehicle
Proponents of raising the gas tax -- and the chattering class is littered with them these days -- have a simple, central argument: gas taxes create a market signal that pushes all vehicle consumers in the direction of fuel efficiency.
Indeed, some conservatives (and car companies) go further: they say that CAFE standards are bad policy because they force automakers to create products for which there's no demand. It's no good making fuel-efficient cars if nobody wants to buy them! (Americans love big, powerful cars. "Everybody knows" that.) Higher gas taxes should replace CAFE, because they create create demand instead of forcing supply.
A moment's thought reveals a serious flaw in these arguments. Fuel costs are a relatively low portion of total vehicle costs -- maybe 10-20 percent. There's maintenance, insurance, parking, but most of all, the price of the car.
And when the time comes to buy a car, people don't behave like the rational interest maximizers of economic myth. They rarely calculate out future costs like fuel. They consider the number on the price tag in front of them: the price of the car.
It follows that if you want a market signal, you should put it where it will have the most effect: on the price of the car.
As it happens, we have a policy like that! Let's hand the mic to John Heywood, who has headed the Sloan Automotive Laboratory since 1972:
I think we need a purchase tax, a feebate system, like the French have instituted fairly recently. Fees for high-consuming vehicles and rebates for low-consuming vehicles. That will help reinforce consumer response to CAFE requirements by providing a market incentive.
There you go. A clear price signal, applied at the point of maximum effect, supplementing rather than replacing fuel efficiency standards. CAFE standards push automakers to make fuel-efficient cars; feebates push consumers to buy them. (Oh, and unlike gas taxes, feebates aren't regressive.)
How is this not a preferable policy, both economically and politically? What am I missing?