Matthew's Foray into Blogging

Sunday, August 21, 2005

Lookin’ for Tax in All the Wrong Places

The government is taxing all the wrong things, and not taxing the right things. Though not a novel notion, the current astronomically high gasoline prices have again prompted me to have such thoughts. Amid all the speculation as to the reason for three-dollar-a-gallon gasoline, such as the war in Iraq or corporate greed, simple supply and demand seems to be the cause of our woes.

This again leads me to think that, if America were not so reliant on oil, I could hop in my alternative fuel vehicle and travel about without a thought as to how much it would cost me to power my automobile. One of the myriad ways government could reduce dependence on oil would be to make gasoline expensive enough that consumers would be forced to change their consumption habits; that is, government could tax gasoline more heavily.

In an August 13, 2005 New York Times article, “At the Pumps and on the Web, Drivers Check for Lowest Prices,” Kirk Johnson reported that George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, stated, “I think it would be a good thing if gasoline prices were twice as high as they are now, though I know that won’t make me popular.” “Professor Loewenstein said a gradual increase in the gasoline tax, as opposed to market-driven price increases that he said benefited mainly oil producers, would help the federal budget deficit and decrease dependence on foreign oil by encouraging conservation.”

Instead, the federal government offered tax incentives for the purchase of SUVs, and phased out tax credits for hybrid cars. Any vehicle over 6,000 pounds qualified for a $100,000 tax break until 2005. “Clean fuel” vehicles are eligible for tax relief, also. However, the deduction ceiling began at $2,000, with the tax deduction set to end in 2006, with $500 less available each year as the deduction is phased out. Fortunately, new federal tax credits for hybrids are starting in 2006. Unfortunately, less efficient hybrids receive larger tax credits than more efficient hybrids. For example, the four-wheel drive Toyota Highlander Hybrid will actually be eligible for a larger tax credit than the more fuel-efficient two-wheel drive version.

Energy companies benefit tremendously under the new energy bill, so they can continue using coal and oil. In the short term, it does not benefit their bottom lines to explore and produce alternative energies, so why should they? The new energy bill provides for $14.5 billion in energy tax breaks, much of it to traditional energy companies, such as oil and gas.

Rising gas prices are not the only ill that government could attempt to cure via taxation. Currently illegal narcotics could be a source of tremendous tax revenue, if they were legalized and the costly failure of a drug war was ended. That is a completely different subject into which I will not venture right now, though.

2 Comments:

  • It's crazy here in Britain. Petrol is almost £1 a litre but the roads keep getting more crowded. In 15 years time they want to start charging us by the mile using satelite technology and tracking devices in our cars. Travelling on the motorway at rush hour will be incredibly expensive while the country roads will be cheaper as will off-peak hours. The impact on all aspects of life will be huge. Are they planning that for you too?

    By Blogger Lesley, at 7:49 AM, August 24, 2005  

  • I have heard such proposals, but I don't think anything of the sort is in the works.

    By Blogger Matthew, at 3:56 AM, August 25, 2005  

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