The gas tax is inefficient

[Barbbtx]

You know, some people don't want to drive around in little clown cars just to FEEL good and SUPERIOR. Some people have three kids and a couple dogs. They won't fit in a toy car. Also, they are not as safe.
We don't have to buy foreign oil. We are forced into it by a government that won't allow us to drill our own. Why don't we drill everywhere we possibly can, and fast as we can until we run out? Then the liberals can have their way and we will be forced onto bicycles, battery operated cars , horse and buggy etc. (not that we would ever run out before real alternatives were found) And
Don't give me that crap of gas guzzlers being the blame of us funding terrorism. That goes solely in the lap of liberals, environmentalists and the government.

 

[imagep]

Move closer to work? Not an option if you own your home. Renters might find that option viable....
Even if you are just now buying a home....what assurance do you have that you will have the same job a year from now?

Trying to make the very large USA fit the EU mold is not an easy thing to accomplish...

Anything is an option. One could sell their house and buy another one, or rent out their house and move closer to work, or take mass transit, or simply work closer to home.

 

[UtahBill]

Anything is an option. One could sell their house and buy another one, or rent out their house and move closer to work, or take mass transit, or simply work closer to home.

One could, maybe 2....it appears you are not aware of the market. Not every city has sufficient mass transit. Lots of things are easier said than done....

 

[phattonez]

YOU are the one who brought it up, why do that if you are not inviting a response?

I brought up an issue, and I want to be debated on the issue. I don't want you to say that I'm arguing for a position that I'm not arguing for. This is what I want: Variable-priced toll roads where price reflects supply vs. demand, so that price goes up during rush hour and falls all other times. I want this to be what pays for the freeways instead of the gas tax that we currently use.

Do you believe that sending wealth outside a country for a consumable good is a good thing for a country or an economy? At a rate then wealth is put into an economy.

It's good for an economy if this would be the natural state of things without government intervention. It means the other country does it for a comparatively lower price (meaning this country is better at doing somethings and would waste its time doing other things, so it is good when it is bought from those other countries for the overall wealth of the country).

Or lets just simplify it and put it on a personal level, is it a good thing to spend more money then you make for an extended period of time?

That's a different issue entirely.

You are the one upset that gas taxes did not address road congestion, which generally would indicate a belief that the intent of that person that the gas tax was intended to address road consumption

I'm not upset that it doesn't address congestion; that's just a basic fact of the gas tax. I am proposing a better system that would pay for roads and address rush-hour congestion. The gas tax was meant to pay for roads, but is inefficient in the respect that it does nothing to address rush-hour demand. Tolling gets you the money for the roads and addresses this issue.

 

[phattonez]

It has caused Europeans to buy a form of transportation laughed at in the US, scooters. Scooters outsell cars every year as the most popular form of transportation worldwide. The US, with it's need to drive 7000lb vehicles for one person to get to work carrying a briefcase, has put us in the leaderboard of fuel consumption. In Europe my scooter would be the envy of the neighborhood, in the US I'm laughed at. Well, let's see who has the last laugh at the gas pump.

Of course being a Libertarian, I am 100% in favor of people having that right. But just like the ground zero mosque, I don't think it's a good idea. As they say, the right to do it doesn't make it the right thing to do. You cause issues when you do that. You don't need an 8mpg vehicle to get you to work when you can find a cheaper vehicle getting 5 times that and getting you to work in the level of comfort and in the same timeframe as the bigger vehicle.

Americans being fat, dumb and happy don't realize we're shooting ourselves in the foot. While some stand up and demand the right to buy Hummers, Escalades, etc, others are holding up charts of our consumption of fuel and how, per capita, it far exceeds any other nation on earth and then ask, "Where do we get this oil from?" Nations that hate us? Yep. You want to fund the terrorists these nations assist? Well, keep driving your SUV's. You're exercising your right, and well, so is Iran and Venezuela. I know, many people HATE to hear that "they fund terrorism" by driving gas guzzlers but, really, it's true. We aren't an oil independent nation and the vast majority of our oil comes from countries who wish us harm and who would gladly sell to China if we went down so yea, I mean it sucks BIGTIME to say, but it's true.

If we were 100% oil independent I wouldn't care less what people drove.

I guess that things would change if we had an emissions fee, but we just don't expect cars to pay for the pollution that they create. It's crazy.

 

[phattonez]

One could, maybe 2....it appears you are not aware of the market. Not every city has sufficient mass transit. Lots of things are easier said than done....

How a person would address the problem of a previously "free" road now being tolled (in order from what I see as most desirable to least desirable).
1. Pay the toll.
2. Use the road when the toll is cheaper.
3. Use roads that do not have a toll (this is low because presumably these would have really terrible average speeds).
4. Use alternate transportation (just based on trends of how Americans really value their cars).
5. Move closer to work.
6. Find another job.

 

[phattonez]

So let me lay out exactly what my proposal is. All freeways should be tolled. The toll price should be based on the amount that would keep the speed of the freeway decent (say an average of 45 mph). The gas tax would be lowered as it now would only be needed to pay for streets.

So the tolled road would be used for maintenance on the freeways (resurfacing, cameras, highway patrol, etc.), and if demand is high enough, the resulting profit could be used for road construction to increase capacity.

And with this tolling, I think some new trends would develop. We would see people moving closer to work. I think we would see more road construction. We might even see some competition from private businesses (like opening up their own toll roads or creating some transportation system).

Right now, driving on a road imposes a negative externality on other travelers. Government or private businesses should use this fact to charge a price to drivers so that this negative externality is realized and then use that money to increase capcity and ensure that roads get adequate funding.

 

[Lord Tammerlain]

It's good for an economy if this would be the natural state of things without government intervention. It means the other country does it for a comparatively lower price (meaning this country is better at doing somethings and would waste its time doing other things, so it is good when it is bought from those other countries for the overall wealth of the country).



That's a different issue entirely.

A persistant, large trade/current account deficit is not good for an economy, as it signifies wealth leaving the country. It is definately going to negatively affect the economy/country at some point. Generally through a lower standard of living

 

[Kushinator]

Gas tax has nothing to do addressing peak usage or demand vs supply. It has to do with forcing people to think about their usage and what kind of car they buy. Walk to the corner store instead of driving and buy a small compact that can go 60+ miles per gallon instead of the SUV that does 10. But then again you guys dont have any gas tax that means anything

In areas that developed on massive unclaimed landscapes, taxing gasoline will not really effect demand to the extent that raising the tax increases revenues. Besides, over taxing gasoline will force it into the black market until a viable substitute is established and implemented.

There are more people in rural areas here in the US (and by rural i also mean far away from other people). Pigouvian taxation on necessities often impose their own externalities.

 

[imagep]

So let me lay out exactly what my proposal is. All freeways should be tolled. The toll price should be based on the amount that would keep the speed of the freeway decent (say an average of 45 mph). The gas tax would be lowered as it now would only be needed to pay for streets.

So the tolled road would be used for maintenance on the freeways (resurfacing, cameras, highway patrol, etc.), and if demand is high enough, the resulting profit could be used for road construction to increase capacity.

And with this tolling, I think some new trends would develop. We would see people moving closer to work. I think we would see more road construction. We might even see some competition from private businesses (like opening up their own toll roads or creating some transportation system).

Right now, driving on a road imposes a negative externality on other travelers. Government or private businesses should use this fact to charge a price to drivers so that this negative externality is realized and then use that money to increase capcity and ensure that roads get adequate funding.

I understand what you are suggesting, but personally I am way too libertarian for your approach. You are basically suggesting "social engineering" by penalizing people for behavor that you find unacceptable (using certain roads during certain times of day). Then you want to pass the monetary profits of your social engineering to others (in the form of reduced taxes) who have not neccesarally done anything to deserve the compensation.

I think that the libertarian approach is much more fair - fewer laws and restrictions and let each individual make up his mind which road he is going to travel on at any given time without being penalized by the government for doing so. I simply tend to avoid high traffic areas during "rush" hours. Works for me. If I choose to travel in a congested area at peak usage time then I pay the price in terms of time wasted - and other people recieve the reward of saving time at my expense. We shouldn't reserve the most desirable PUBLIC facilities just for the rich (although if the roads were private I may tend to agree with your concept).

And I actually think that the gas tax is a good thing. It tends to be a realitively direct way of paying for what we use according to how much we use it. If we use a lot of gas we most likely use a lot of road miles and thus it is reasonably fair that consumers of large amounts of gas pay for a proportionally large amount of the cost of roads, traffic police, and other transportation related expense. I would much prefer a straight out gas tax to any toll road.

 

[imagep]

Just another note about gas taxes...

With high gas taxes we will tend to drive less or at least drive more efficent vehicles. This leads to a fairly equal reduction in road congestion and polution. Lets say that if higher gas taxes lead to a 20% reduction in our driving miles, then we would have 20% less usage of all roads regardless of the nature of them (including congested freeways).

This also leads to the unintentional but economically positive result of less oil being imported. One of our largest areas of trade deficit is for crude oil, so high gas taxes would actually indirectly help our economy (as long as the revenue from high gas taxes results in an equal reduction of other types of taxation) - and it can be done in a manner that is reasonably revenue neutral to individual families so that the higher gas taxes do not reduce our overall lifestyle (by reducing the lower tax rates).

 

[Kushinator]

A persistant, large trade/current account deficit is not good for an economy, as it signifies wealth leaving the country. It is definately going to negatively affect the economy/country at some point. Generally through a lower standard of living

A large current account balance signifies wage, resource, specialization differentials between trade partners, and essentially proves we have the wealth to live outside our productive capacity. A lower CA lowers US standard of living. I am truly not understanding how you came to such a conclusion.

 

[imagep]

A large current account balance signifies wage, resource, specialization differentials between trade partners, and essentially proves we have the wealth to live outside our productive capacity. A lower CA lowers US standard of living. I am truly not understanding how you came to such a conclusion.

Maybe I shouldn't interfere, but I think you guys are saying the same thing.

 

[Kushinator]

Just another note about gas taxes...

With high gas taxes we will tend to drive less or at least drive more efficient vehicles. This leads to a fairly equal reduction in road congestion and pollution. Lets say that if higher gas taxes lead to a 20% reduction in our driving miles, then we would have 20% less usage of all roads regardless of the nature of them (including congested freeways).

Nope! High costs of energy diminish output (as we do not possess a true resource advantage compared to other nations). Fuel specifically is an inelastic commodity given the size and mobility of the US.

This also leads to the unintentional but economically positive result of less oil being imported.

Less oil imported without sufficient domestic supply reduces our standard of living.

One of our largest areas of trade deficit is for crude oil, so high gas taxes would actually indirectly help our economy (as long as the revenue from high gas taxes results in an equal reduction of other types of taxation) - and it can be done in a manner that is reasonably revenue neutral to individual families so that the higher gas taxes do not reduce our overall lifestyle (by reducing the lower tax rates).

I like where you're going. But the tax scheme will be undoubtedly more complicated as high petroleum costs reduce real GDP growth. The key is to phase out petro use with viable alternatives (role of government). That is, incentivize domestic alternative energy development with tax incentives. Great care is required; bubbles arise out of the most unsuspecting markets (and even energy is susceptible).

 

[imagep]

Nope! High costs of energy diminish output (as we do not possess a true resource advantage compared to other nations). Fuel specifically is an inelastic commodity given the size and mobility of the US.

I understand that theory, but if the additional cost of energy due to a tax is offset by an equal and offseting reduction in other taxes they why would it diminish production?

Less oil imported without sufficient domestic supply reduces our standard of living.

Only to the extent that we can't conserve fuel. Personally, I have 4 cars, 3 of them are big SUV's and one is a economy car. With the cost of fuel realatively inexpensive, I prefer to drive my SUV's, but if the cost of fuel was to rise, I would tend to drive my economy car more. Yes, to a certain degree that would reduce my standard of living because I would be less likely to drive my prefered car, but as long as my economy car can take me to the same places, any reduction in my standard of living (in this case we are only talking about personal comfort) would be negligible. But, if the increased revenue from gas tax resulted in a decrease in other taxes that I have to pay, I can still afford to drive my SUV without having a reduction in lifestyle - although I may tend to drive my SUV less so that I can have a significantly increase in lifestyle by other methods (such as investing the tax savings, or by being able to afford steak instead of bologna).

I like where you're going. But the tax scheme will be undoubtedly more complicated as high petroleum costs reduce real GDP growth. The key is to phase out petro use with viable alternatives (role of government). That is, incentivize domestic alternative energy development with tax incentives. Great care is required; bubbles arise out of the most unsuspecting markets (and even energy is susceptible).

Where I am going is that we don't neccesarally want to have to pay higher taxes on anything to "incentivize" alternative energy. Higher taxes on gas can be offset by lower taxes on income as long as the additional tax revenue is not spent (like by subsidizing private companies), but higher taxes will not be offset by lower taxes if the additional revenue from the higher tax is spent on subsidizing private industry (because the additional tax money is spent).

 

[PeteEU]

In areas that developed on massive unclaimed landscapes, taxing gasoline will not really effect demand to the extent that raising the tax increases revenues. Besides, over taxing gasoline will force it into the black market until a viable substitute is established and implemented.

There are more people in rural areas here in the US (and by rural i also mean far away from other people). Pigouvian taxation on necessities often impose their own externalities.

So you make policy based on a few rural peoples? This the typical "the US is big" excuse, and it always lame.

The idea of gas tax has always in large part been to get polluting cars off the road and force people to invest in non gas guzzlers. The free market can not do this, because the free market will always go for the cheapest solution and that is always the most polluting. Hence incentives are needed.

And so what if the rural people need their cars to drive around. So do rural people in Europe.. far from all live in towns and cities you know...

 

[Lord Tammerlain]

A large current account balance signifies wage, resource, specialization differentials between trade partners, and essentially proves we have the wealth to live outside our productive capacity. A lower CA lowers US standard of living. I am truly not understanding how you came to such a conclusion.

Yes you have the wealth to live outside your productive capacity currently.

However what how is that achieved?

You are sending preexisting wealth outside of your country in order to pay for the current account deficit. You are lowering your wealth to pay for those goods. If the deficit continues for an extended period of time your wealth will be reduced quite drastically.

Lower wealth generally means lower investement income, or capital gains for the nation as well


Generally a current account deficit is only a good thing when the country is importing capital goods, that will improve the productivity of the nation.

 

[Kushinator]

Image,

The basis behind pigouvian taxation is to force greater budgetary constraint on an individuals "indifference curve" so to reduce consumption of a particular good/service to an acceptable level. By increasing taxes in one area and decreasing them in another, free riding (for non tax payers it will simply be a greater burden) will be the main achievement with such a policy and consumption of petro will remain constant regardless. Revenues will be (at best) neutral and probably negative due to vast differences in consumption.

However, if you lower income taxes, increase fuel taxes and subsidize renewable technology, the solution is more likely to be developed.

 

[imagep]

Image,

The basis behind pigouvian taxation is to force greater budgetary constraint on an individuals "indifference curve" so to reduce consumption of a particular good/service to an acceptable level. By increasing taxes in one area and decreasing them in another, free riding (for non tax payers it will simply be a greater burden) will be the main achievement with such a policy and consumption of petro will remain constant regardless. Revenues will be (at best) neutral and probably negative due to vast differences in consumption.

However, if you lower income taxes, increase fuel taxes and subsidize renewable technology, the solution is more likely to be developed.

You totally lost me on that first paragraph. I do agree with the second paragraph though. It's basically the same point that I was making except that I don't think we need to subsidize anything. And here's why:
1) If we raise fuel taxes and then lower income taxes (in an income neutral sort of way) then we have no money left over for subsidies.
2) If we raise fuel taxes, the cost of fuel will go up, we will then use less fuel, so the need for alternative energy will not be as great.
3) If the cost of fuel goes up due to increased fuel taxes, private enterprise will have a natural capitalistic incentive to develope alternative fuels

 

[Kushinator]

You are sending preexisting wealth outside of your country in order to pay for the current account deficit. You are lowering your wealth to pay for those goods. If the deficit continues for an extended period of time your wealth will be reduced quite drastically.

Let' clear this up a bit. Assume a zero account balance where consumers are only able to purchase domestic goods. What this amounts to is US consumers (even if they are able to purchase what they need) will be forced to pay a higher percentage of their incomes for these goods then if they were imported from a low cost labor nation. On top of higher costs, specialized production/services (a function of aggregate supply) will be lower as well, meaning we will not be in a prime position on our production possibilities frontier.

Now assume we have the mobility to import goods from low cost labor nations. Items and services that formerly accompanied US labor costs are now cheaper as a result in wage differentials (which is the low wage nations labor comparative advantage). This allows for increased consumption on all fronts (typically known as the income effect via the marginal rate of ("technical" is the same concept only from the production standpoint) substitution). Production then is allowed to move to a more "desirable" position on the PPF as we allow ourselves to produce in accordance to our comparative advantage (in this case, capital intensive goods/services).

While we might be sending more money out then we take in, producer's revenue grows as gross exports increase, and internal production/consumption increases due to the income effect generated by cheaper goods.

Therefore, GDP increases, wages increase, and a nation is able to consume outside it's productive capacity while maintaining a greater efficient allocation of production.

Generally a current account deficit is only a good thing when the country is importing capital goods, that will improve the productivity of the nation.

Nope! This is basic micro (neoclassical theory of the consumer). The gains from the income effect and specialization outweigh the costs of importing.

Trade is not a zero sum game.

 

[Kushinator]

You totally lost me on that first paragraph.

Sorry about that, elasticity, externalites, and pigouvian taxation should be understood before making such policy analysis. Pigouvian taxation is only effective if the specific good in question does not display inelastic qualities.

I do agree with the second paragraph though. It's basically the same point that I was making except that I don't think we need to subsidize anything. And here's why:
1) If we raise fuel taxes and then lower income taxes (in an income neutral sort of way) then we have no money left over for subsidies.
2) If we raise fuel taxes, the cost of fuel will go up, we will then use less fuel, so the need for alternative energy will not be as great.
3) If the cost of fuel goes up due to increased fuel taxes, private enterprise will have a natural capitalistic incentive to develope alternative fuels

My issue is with the bold, as it is (unfortunately) incorrect.

 

[imagep]

Sorry about that, elasticity, externalites, and pigouvian taxation should be understood before making such policy analysis. Pigouvian taxation is only effective if the specific good in question does not display inelastic qualities.



My issue is with the bold, as it is (unfortunately) incorrect.

If the cost of gas went up, I will 100% guarantee you that we will tend to use less of it. Why wouldn't we? It's very easy to use less gas. Let me give you a few examples of how higher fuel prices would effect my consumption:

1) I would drive my economy car more and my SUV less.
2) I would stop by the grocery store on my way home from work instead of going home from work and then driving back to the grocery store.
3) I would carpool with other people on the trip we will be taking to Indianapolis in November rather than driving my own car (or alternatively they could ride with me).
4) I currently run business errands 5 days a week, this could be cut to 3 or 4 days a week if I had the $$$ motivation to do so.
5) Instead of going to the movies once a month I would stay home and watch "on demand" more.
4)

 

[Lord Tammerlain]

Let' clear this up a bit. Assume a zero account balance where consumers are only able to purchase domestic goods. What this amounts to is US consumers (even if they are able to purchase what they need) will be forced to pay a higher percentage of their incomes for these goods then if they were imported from a low cost labor nation. On top of higher costs, specialized production/services (a function of aggregate supply) will be lower as well, meaning we will not be in a prime position on our production possibilities frontier.

Now assume we have the mobility to import goods from low cost labor nations. Items and services that formerly accompanied US labor costs are now cheaper as a result in wage differentials (which is the low wage nations labor comparative advantage). This allows for increased consumption on all fronts (typically known as the income effect via the marginal rate of ("technical" is the same concept only from the production standpoint) substitution). Production then is allowed to move to a more "desirable" position on the PPF as we allow ourselves to produce in accordance to our comparative advantage (in this case, capital intensive goods/services).

While we might be sending more money out then we take in, producer's revenue grows as gross exports increase, and internal production/consumption increases due to the income effect generated by cheaper goods.

Therefore, GDP increases, wages increase, and a nation is able to consume outside it's productive capacity while maintaining a greater efficient allocation of production.



Nope! This is basic micro (neoclassical theory of the consumer). The gains from the income effect and specialization outweigh the costs of importing.

Trade is not a zero sum game.

Never said trade is a zero sum game, but neither is accounting.

You spend more then you make, you will pay a price eventually. This goes for individuals, companies and countries. You may in the short term benifit from cheaper goods allowing you to buy more then you otherwise would have, but eventually the amount of money leaving the economy, will exact a toll on it. This will lower incomes in the future, either directly as investment income leaves the country, or it will lower wealth as capital assets are bought by foreigners, allowing them to make the capital gains

A large current account deficiet that is persistant would not be possible under a "gold standard", and is only possible with the fiat currency system we have now. Under the gold standard, a country would not have the ability to fund a large persistant current account deficit as their gold inventory would be reduced over time (as people demanded gold for their "dollars") This is the accounting side of the issue. With the fiat currency system, what will typically occur is inflation

 

[phattonez]

I understand what you are suggesting, but personally I am way too libertarian for your approach. You are basically suggesting "social engineering" by penalizing people for behavor that you find unacceptable (using certain roads during certain times of day). Then you want to pass the monetary profits of your social engineering to others (in the form of reduced taxes) who have not neccesarally done anything to deserve the compensation.

I think that the libertarian approach is much more fair - fewer laws and restrictions and let each individual make up his mind which road he is going to travel on at any given time without being penalized by the government for doing so. I simply tend to avoid high traffic areas during "rush" hours. Works for me. If I choose to travel in a congested area at peak usage time then I pay the price in terms of time wasted - and other people recieve the reward of saving time at my expense. We shouldn't reserve the most desirable PUBLIC facilities just for the rich (although if the roads were private I may tend to agree with your concept).

And I actually think that the gas tax is a good thing. It tends to be a realitively direct way of paying for what we use according to how much we use it. If we use a lot of gas we most likely use a lot of road miles and thus it is reasonably fair that consumers of large amounts of gas pay for a proportionally large amount of the cost of roads, traffic police, and other transportation related expense. I would much prefer a straight out gas tax to any toll road.

Sorry, but what I'm proposing is the furthest from social engineering. Look at the most libertarian model, a free market for roads. Roads would be tolled. During rush hour, tolls would go up because of increased demand. Any entrepreneur would want to tap that potential. Why does that potential exist? Because driving creates a negative externality of traffic on other drivers, but toll roads take care of that externality.

You would deal with rush hour traffic, you would get enough money to build more capacity. With the gas tax, you get the same price no matter which road you use and no matter what time you drive at. That would be totally unrealistic in the libertarian model. What we have now is closer to social engineering because it basically makes the libertarian model solution illegal.

 

[drz-400]

Goldenboy, what is your position on a cap and trade type of tax. It would not affect rural consumers of gasoline (unless they emit huge amounts of CO2). It would allow the company that needs the energy the most to buy it while those who don't can sell their shares. Free riding and the black market would be negligible in my opinion due to the size of those involved with the program (its not like they could be discrete about where their factory gets its energy). It would essentially subsidize lower carbon intensive fuels because they will then not have to buy as many carbon shares. I know it is different than what you have been talking about, but I think it addresses your concerns about a straight up increase in the gasoline tax, while still achieving some of the desired results.