Monday, September 18, 2006

Higher Gas Taxes--Bad Idea

The recent drop in gasoline prices has many of us feeling a little better about things, if only temporarily. However, in an editorial column in this morning's newspaper, Steve Yetiv, a Political Science professor at Old Dominion University, advocates raising taxes on gasoline to take the price at the pump to around $4.00/gallon. He claims that this price would "seriously challenge our oil-guzzling culture". He is likely correct about that. We have already seen some of these effects as automakers have suddenly ended up with a lot of unsold pickups and SUV's and have started developing more hybrid vehicles. There is also a rise in the use and availability of alternative fuels. He also acknowledges that the tax would "disproportionally hurt poor people". I assume he is referring to those who cannot afford to trade in their old clunkers for a new fuel-efficient vehicle or who, because of the cost of housing, must live a large distance from where they work. However, he claims that these affects could be mitigated by a corresponding lowering of other taxes. First of all let me say "yeah, right"; I'll believe other taxes being lowered when I see it. Beyond that, however, there is one aspect of the concept of increased gasoline taxes that Mr. Yetiv does not address, and that is the domino effect caused by higher energy prices. Whether higher energy prices are because of taxes or because of the world price of crude, the average consumer ends up paying twice for it, first at the pump, and then in the cost of virtually everything else as the higher cost of energy is "passed on to the consumer" by the manufacturer who makes the product and the trucking company that transports it to the local marketplace. The consumer is at the bottom of the pile when it comes to this situation. There is no one left to pass on the increased costs to, and so these increased costs must be absorbed. (Most of us do not get automatic raises when the price of gas goes up). This gives the consumer less money to spend on other things. Since consumer spending is what drives the American economy, the entire economy ultimately suffers from higher energy costs. This is why I feel that Professor Yetiv's gasoline tax is a bad idea.

So Sayeth The Shack

No comments: