Thursday, February 17, 2011

Gas Price Hikes Only OK When Money Goes To Big Oil

In the Washington Post, Steve Pearlstein says raising the gas tax by 60 cents last year would've been seen as political suicide. But gas prices have gone up 60 cents just the same, and instead of funding desperately needed repairs to Metro or our crumbling roads & bridges, the money has gone to BP, ExxonMobil, Hugo Chavez, Mahmoud Ahmadinejad, the list goes on.

And what's been the impact of those gas price hikes?
During that same period, private businesses created 1.2 million jobs and recorded near-record profits, stock prices rose by more than 20 percent and auto sales were brisk enough that General Motors recently handed out $4,000 profit-sharing checks to each of its unionized workers.

History will also record that, during that same time period, not one politician that I am aware of took to the floor of the House or Senate to denounce this "job-killing" 23 percent increase in the price of gasoline.
Doesn't exactly sound like the predicted Armageddon, does it? What anti-tax ideologues will never admit is that there are certain taxes - the gas tax, cigarette taxes, the estate tax - that you can raise with limited economic impact (and contrary to conventional wisdom, an increase in the gas tax is not regressive).

Even though gas prices are back above $3 a gallon, consumption remains near historic highs. Gas consumption just doesn't respond to price changes very quickly - if the price of beer goes up today, I can switch to wine tonight; but if the price of gas goes up today, it might take months or years to change my habits or living arrangements - and if I have kids in school, my hands might be completely tied.

The best way to reduce energy costs for drivers is by increasing vehicle fuel efficiency, which the Obama administration is doing. But when consumption goes down, gas tax revenue goes down, meaning we have less money for transit, roads & bridges. So a gas tax increase makes sense, but as the Car Talk guys famously pointed out, politicians are too wussy to do it.
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