Walter McManus: Should we Raise the Gasoline Tax
Posted in Money, Politics by George
Glad to see more support for the Gasoline Tax. If you follow gimme-five, you’ll notice I’ve definitely been advocating such a thing for the past two years or so. Walter McManus has recently written an article on whether or not we should raise the gasoline tax.
McManus goes into some light economics, discussing why the demand curve for gasoline is, indeed, price elastic and downward sloping. Because of this, people will change their driving habits and car purchases to limit the damage that high gas prices would do to their budget otherwise.
An article I linked to a while ago by Charles Krauthammer, which McManus also mentions, says that it would have been ideal to just keep raising the gas tax incrementally as the prices of gas fell from $3 per gallon to just keep the price consumers are paying at $3. As I stated in my previous article, I applaud this idea once again.
The interesting thing about McManus’s article is that he makes some predictions on how this will affect the market share of different cars with differing MPG ratings.
Definitely check out this short article.
April 11th, 2006 at 9:32 am
hey george, have you seen anything about the feasibility of hybrids these days. I thought that so far, hybrid cost savings do not have enough benefit in terms of gas costs to offset their more expensive price. However, this could be before the latest spike…and a 2 dollar “tax” could improve this.
I’ll look around for some calculations on that.
Secondly, where is this tax gonna go? Congress kinda has a similar tax on cigarettes, but cigarettes are a little bit more addictive, so their demand doesn’t change when prices change, and so the gov’t has a cash cow there.
Where would the tax money go? If they lowered other taxes then it wouldn’t have the same effect as they desired…
April 11th, 2006 at 10:27 am
First off, hybrids are dropping in price, and the drop in price is only becoming more rapid. They might even switch over to lithium-ion batteries instead of Ni-MH batteries which according to some sources (I can’t produce a web address, so feel free not to take this point into account) will allow a prius to get 96 miles per gallon. Also, tax breaks are given to purchasers of hybrids, and a recent apology was just issued by consumer reports, stating that they made a mistake, and hybrid owners will come out slightly ahead in the long run if they buy a hybrid today.
I only see gas prices going higher…
Second, the gas tax can go anywhere. How about alternative energy research which we so desperately need to look into? How about paying down the gigantic national debt? How about social security? We have tons of needs…
April 11th, 2006 at 10:29 am
See this article on MSNBC:
http://www.msnbc.msn.com/id/12265103/from/RSS/
April 11th, 2006 at 11:30 am
1. Krauthammer is an idiot. I find it hard to believe that any thinking person still respects that jackass. But whatever, — people that I know that study economics and business read the NYT and the WSJ thinking this is the , and they believe half the sh*t printed in there. It’s not news or opinion folks. It’s advertisement, and paid propaganda.
2. Government supports large gas guzzlers a lot more than hybrids. For example the tax break on the hybrids is about $3700 (I forget if its a credit or deduction) while the tax break is $25,000 on a gas guzzler SUV (under section 179) and up to $105,000 for a qualifying truck over 6000 lbs and a 6′ bed. Any of those larger vehicles that you get the great $ breaks on are 8-cyl and typically get about 12-15 mpg in the city and 15-20 mpg on the highway.
The greeners would have to pony up to the government corruption trough to the same level that the energy and carmakers currently do; until that happens I doubt it.
However, given that Republican sentiments are on the wane in the US we’ll get to see firsthand if the Democrats are socially conscious or friends to big business (or maybe both).
April 11th, 2006 at 11:59 am
http://www.autoexpress.co.uk/news/66260/prius_hits...
Here is the prius article about getting supposedly 113 MPG.
And you don’t necessarily have to believe everything someone says, but when someone says something sensible, that I’ve already made up my mind on, such as a gas tax, then I don’t think that it’s too unbelievable for me to agree with him.
Yes, the government sucks when it comes to tax breaks for hybrids… but times could change… as you said.
April 12th, 2006 at 1:48 am
SAN FRANCISCO — Venture capitalist John Doerr made his name and fortune with early investments in Netscape Communications Corp., Amazon.com Inc., Google Inc. and other pioneering tech firms that went from scrappy startups to household names.
Now Doerr and his firm, Kleiner Perkins Caulfield & Byers, are placing big bets on an emerging sector he calls “green technology,” one he believes could become as lucrative as information technology and biotechnology.
http://www.enn.com/today.html?id=10242
“Prius backlash” is the new hip thing to talk about.
http://www.latimes.com/news/local/la-me-hybrids10a...
I do agree with those who say Prius drivers shouldn’t be in carpool lanes if only one person is in them. The idea was to provide incentive for people to buy a Prius or like car but there is a long wait list already and drivers so people don’t need more incentive and the Prius drivers don’t go fast enough in the carpool lane. I am, however, down with the owners getting tax incentives.
April 12th, 2006 at 2:44 pm
“Prius drivers don’t go fast enough in the carpool lane.”
I don’t think that’s a fair generalization. There are tons of different types of drivers that drive a Prius. The car has the same basic speeds as any car, it’s not like they can only go 10 miles per hour or something.
I think we should just have an average miles per gallon per person of 50 that you must have to drive in the HOV lane. So if you have a truck that gets 20 miles per gallon, but you have five people in it, you get 100 miles per gallon per person, and can stay in the carpool lane. If you have a car that gets 45 miles per gallon but only one person in it, then you don’t get to drive in the lane. The tough thing would be implementing this policy.
April 21st, 2006 at 7:36 pm
Well according to the Ramsey rule we should have a very high tax on gas should it prove to be inelastic but not as great if it is elastic. Then again the ramsey rule isn’t exactly a social conscience economic theory at least not in its pure form (think about the inelasticities of certain medical treatments).
With regards to the tax breaks posted above. I like how the girl posts tax break info for an individual and then compares it with a small business. Thats apples and oranges.
I am opposed to an increase in a gas tax. I really just do not see what benefit we derive from upping the gas tax. Govt Revenues increase but only temporarily assuming some other fuel comes ahead and govt don’t respond well to sharp decreases in revenue. If we don’t find an alternative then we are just taxing needlessly. Sure you could argue that the polution it gives off is a negative externality and that should be taxed, however it already is taxed. It would desperately hamper Consumer Spending which represents roughly 2/3 of GDP.
A better alternative is to empower the individual and the market rather than punish them. Spend money on private reseach and provide tax breaks to support innovation. Mandate infrastructure change when it becomes feasible. Don’t limit the individual through a punishing tax but instead empower them to make a change.
I don’t understand why people assume taxes solve all problems. Gas in Norway is 8$ a liter, or gallon, I don’t remember which. Either way we don’t see them coming up with the solution.
April 22nd, 2006 at 12:41 pm
With regards to the tax breaks posted above. I like how the girl posts tax break info for an individual and then compares it with a small business. Thats apples and oranges.
The comparison was intended to demonstrate the government’s (un)willingness to offer tax breaks on hybrid technologies vs V8s, but I do like eating fruit salad which contains apples, oranges and honeydew chunks.
What’s the relationship between 1065, K-1 and the 1040, cause I forget? I always thought of them as an apples and oranges meal.
April 23rd, 2006 at 12:47 am
“They might even switch over to lithium-ion batteries instead of Ni-MH batteries which according to some sources (I can’t produce a web address, so feel free not to take this point into account) will allow a prius to get 96 miles per gallon.”-George
This is pure BS. First off, hybrids are meant to be practical, so buying a car that costs more than it saves and cant do anything but drive with a limited cargo space and limited capability isn’t practical. A gas-electric Highlander costs an upwards of 40K. This is crap. I don’t care how environmentally friendly it is, it cost me too much for what it will save me. Also, switching from Nickel-metalhydride to Lithium-Ion batteries will cost even more (minus the cost of getting the diposal facilities capable of getting rid of used up batteries. Yes they do wear out.). How much do you think an auto maker will price a car that has basically surpassed all mpg ratings ever at 96 mpg. They will price it high because consumers will be willing to pay for the mileage, probably in the mid 30’s to low 40’s, I know as a manufacturer I would.
ALTERNATIVE FUELS MUST BE PUSHED. E85 or even E95 could be used with little price change and even cheaper prices at the pump. All engines can run off of E85 but it can damage them (seals, plugs, etc). Despite for there having to be 500 million acres devoted to ethanol production, it would be worth it while boosting business those in the agricultural industry. I would never trade in a $40,000 Chevrolet Silverado truck, which is a FFV (ethanol capable), for a smal car that I don’t like after I worked to buy that truck which is bigger, more powerful, has more capability, storage, configurability, and just looks better than the car, to me. But whatever, buy what you want.
“I think we should just have an average miles per gallon per person of 50 that you must have to drive in the HOV lane. So if you have a truck that gets 20 miles per gallon, but you have five people in it, you get 100 miles per gallon per person, and can stay in the carpool lane. If you have a car that gets 45 miles per gallon but only one person in it, then you don’t get to drive in the lane. The tough thing would be implementing this policy.”
How would this be practical, no cars get what the EPA says they get.
Stay Classy,
-Ben
April 23rd, 2006 at 10:43 am
Benny,
You are clearly not thinking rationally. Here are a few tips and points:
1. Saying “crap” or “BS” anything in capital letters because you’re angry doesn’t make your argument stronger.
2. Not all hybrids are “practical” just as not all cars are practical. But if you buy a hybrid civic/prius/etc, you’re going to save money in the long run. Furthermore, the price of hybrids is dropping rapidly thanks to economies of scale and innovation, and the mileage gains are increasing as well.
3. Talk to me when someone creates a reliable car that works with ethanol. Currently all I see is stuff from general motors, and thus, nothing reliable. I’m not buying a car from a company that won’t be in business in ten years.
4. EPA ratings just need to be thought of as relative. I think the lamest argument out there right now against fuel efficient cars is that “no car actually gets what the EPA says.” Does anyone have the capacity to use logic to solve this problem? If no car gets what the EPA says, then all cars don’t have accurate ratings. However, if the EPA tests all cars with the same conditions, we can at least use relative ratings to gauge what car to buy. For instance, if I buy a prius, at 96 miles per gallon, I’m getting about 5 times the amount of mileage that you might get with “big tough truck… GRRR” at 18 miles per gallon. So maybe I only get 90, but you probably only get 15. It’s not precise, but it’s a perfectly good estimate of relative efficiencies.
April 23rd, 2006 at 3:11 pm
“2. Not all hybrids are “practical” just as not all cars are practical. But if you buy a hybrid civic/prius/etc, you’re going to save money in the long run. Furthermore, the price of hybrids is dropping rapidly thanks to economies of scale and innovation, and the mileage gains are increasing as well.”
No you wont. They have constantly been releasing reports as to the true value of the hybrid in terms of savings. The end result is that they do not save you money. Especially with the “hybrids” they are releasing now. Sure the prius gets great mileage but the civic doesn’t really get that much better mileage then the original civic. Likewise many of the other hybrid upgraded cars arn’t that great. Whether the economic disadvantage of hybrids continues to play out is dependent upon future gas prices. If the doomsayers are correct and $4 gas arrives then they will save money over the medium term but whether that is a long term phenomenon is unknown.
“3. Talk to me when someone creates a reliable car that works with ethanol. Currently all I see is stuff from general motors, and thus, nothing reliable. I’m not buying a car from a company that won’t be in business in ten years.”
Most cars in the midwest are dual use. So there you go.
And last your reformed HOV policy is quite simply absurd. If we did this then no one would drive in the HOV lane. One of the biggest selling pionts for Hybrids (since they arn’t cost effective) is that you can drive in the HOV lane. For a city like DC where 66 is HOV only inside the beltway this is a huge perk. In your craze to have everyone drive a hybrid smartcar why don’t you at least work towards having people own hybrids.
April 23rd, 2006 at 7:43 pm
OK, as usual, someone needs to educate me. Why is E85 even considered a viable alternative?
1. It’s basically more expensive than unleaded gas (the only thing that makes it less expensive is a huge tax break — check out Appendix C), and
2. It gets 72% of the mileage per gallon of gasoline. How many more gallons do you need? Is it still cheaper after you get the extra E85?
3. Growing it domestically? Hello?
4. How many college students will get poisoned drinking this stuff? Sure it sounds like a good idea to get a cheap buzz, but I see the next, post crystal-meth craze…Check out the health considerations section — a basic buzz waiting to happen - goodbye glue, hello E85 fumes.
http://www.e85fuel.com/pdf/e85_technical_booklet.p...
April 24th, 2006 at 12:06 pm
Consumer Reports is correcting a calculation error involving the depreciation for the six hybrid vehicles that, in the story, were compared to their conventionally powered counterparts. The error led the publication to overstate how much extra money the hybrids will cost owners during the first five years.
CR’s revised analysis shows that two of the six hybrids recovered their price premium in the first five years and 75,000 miles of ownership. The Toyota Prius and Honda Civic Hybrid provide a savings of about $400 and $300, respectively, when compared with their all-gas counterparts-as long as federal tax credits apply. But extra ownership costs during the first five years and 75,000 miles for the other four hybrids ranged from an estimated $1,900 to $5,500, compared to similar all-gas models.
Previously, Consumer Reports had reported that its analysis showed that none of the six hybrids it had tested recovered its price premium in the first five years and 75,000 miles of ownership.
http://www.infozine.com/news/stories/op/storiesVie...
So basically, you’re going to save money with a prius or civic.
April 25th, 2006 at 9:23 am
Did you read what you copy and pasted?
2/3 of the hybrid models studied cost more with a range from 1900 to 5500 dollars. Of those that ended up saving money (only 1/3 of those studied) the savings was practically negligent, i.e. less the 500 dollars. All of this assumes the tax breaks stay in place which is not necessarily going to be the case.