How we could have saved billions with a gasoline tax

Some of the points recently made by Tom Friedman at: www.nytimes.com/2007/11/14/opinion/14friedman.html?_r=1&oref=slogin

If only we could have slapped a “patriot tax” of $1 or more on every gallon of gasoline sold, this would have greatly diminished the transfers of wealth we were making to the very countries who are indirectly financing the ideologies of intolerance that are killing American soldiers. In addition, such a move would have spurred innovation in energy efficiency by U.S. manufacturers.

But no, George Bush and Dick Cheney had a better idea. And the Democrats went along for the ride. They were all going to “let the market work” and not let our government shape the market, like OPEC does.

But let’s imagine that some brave Democrat had proposed a tax on gasoline. Here’s how the debate could have gone:

REPUBLICAN CANDIDATE: “My Democratic opponent, true to form, wants to raise your taxes. Yes, now he wants to raise your taxes at the gasoline pump by $1 a gallon. Another tax-and-spend liberal who wants to get into your pocket.”

DEMOCRATIC CANDIDATE: “Yes, my opponent is right. I do favor a gasoline tax phased in over 12 months. But let’s get one thing straight: My opponent and I are both for a tax. The difference is that I prefer that my taxes go to the U.S. Treasury, and he’s ready to see his go to the Russian, Venezuelan, Saudi and Iranian treasuries. His tax finances people who hate us. Mine would offset some of our payroll taxes, pay down our deficit, strengthen our dollar, stimulate energy efficiency and shore up Social Security. It’s called win-win-win-win-win for America. My opponent’s strategy is sit back, let the market work and watch America lose-lose-lose- lose-lose.”

If any Dem couldn’t win that debate, they don’t belong in politics.

We could have, and should have, replaced the current payroll tax with a gasoline tax. Middle-class consumers would have seen increased take-home pay of between six and nine percent, even though they would have had to pay more at the pump. In the long run, they all would have been money ahead. Plus, a stronger foundation for future economic growth would have been laid by keeping more oil revenue home, and we might not now be facing a recession.”

As a higher gas tax discouraged oil consumption, the price of oil would have fallen in world markets. As a result, the price of gas to [U.S.] consumers would have risen by less than the increase in the tax. In other words, some of the tax would in effect be paid by Saudi Arabia and Venezuela. (This according to Harvard economist and former Bush advisor Greg Mankiw.)

U.S. consumers would have known that, with a higher gasoline tax locked in for good, pump prices would never be going back to the old days, so they would have a much stronger incentive to switch to more fuel-efficient vehicles, and Detroit would have had to make more hybrids to survive. This would have put Detroit five years ahead of where it is now. “It’s called the America wins program instead of the petro-states win program,” said Phil Verleger, an energy economist.

In conclusion:

We simply cannot go on being as dumb as we wanna be. If you hate the war in Iraq, then you want a gasoline tax so you can argue that we can pull out of there without remaining dependent on an even more unstable region. If you want to see us negotiate with Iran, not bomb it, you want a gasoline tax that will give us some real leverage by helping to reduce the income of the ayatollahs.

A gasoline tax would (and will) reduce the flow of wealth to petrolist leaders -- who will never change if all they have to do is drill well holes rather than educate and empower their people.

A gasoline tax will spur U.S. innovation in energy efficiency.