Friday, May 19, 2006

possible heresy

Ok, everyone knows that I'm a pretty fire-breathing conservative, so what I'm about to suggest my sound strange comming from my mouth.

I want to impose a tax on gas.

You see, my head is full of nonsense after so many finals, but I have been thinking about this for a while, so I've got a plan worked out.

There are two major problems that could be fixed (partially fixed, anyway) by a tax on oil. Everyone is talking about reducing our dependence on foreign oil, and the need to reduce our consumption of fossil fuels to save us from global warming. (Problem 1)
It is also common knowledge that we've spent too much money, actually we've borrowed too much money, and we need to pay it back.(Problem 2)

No one wants to cut down on car trips, so we need to provide a powerful incentive to use less gas and oil. We drive way too much, and our cars could be more fuel efficient using current technology if there was enough demand for that. Plus, we heat our houses too much (I live in Maine, and I know it gets cold, but I also know that we don't need to live in 75 degree temps inside our houses and schools all winter). A tax would artificially raise the price and give people an incentive to cut down.

Likewise, people don't want to give up any of the services that our government provides. I could talk about getting rid of welfare and controling the cost of government services until I was blue in the face, and still no one would listen to me. And if we raise normal taxes, the politicians would just spend it on more services rather than paying down out debt. So, we need a new tax source that would only pay for one thing. It could be written into the law that imposed the tax, so that the money wouldn't be able to pay for anything else, and we could introduce time limits or conditions that would eliminate the tax after we paid down the debt (in a million years) or we could use it for something else later. I'd like to get rid of it as soon as possible, however.

These two goals get met from a tax on gas. There are, however, several ways that we could set it up so that it appears less painful to consumers and also brings in a respectable amount of money.
I just got done taking microeconomic theory (the second year of micro at my school), so I've got several ideas that might work. The main thing to keep in mind is that we're going to be taxing barrels of oil, not gallons of gas at the pump. This has a few benefits not immediately apparent. First, it's a tax on "The Evil Corporations" (I'm saying that with as much sarcasm as I can put into a blog post). It really doesn't matter if we put the tax on the corporations or the consumers because the consumers will end up paying for it anyway (unless the oil industry is a perfect monopoly, which it isn't quite, but that's too much detail for this post), but the liberals will feel good about a tax on corporations, and most people won't be so mad about a new tax on people that isn't them (even though prices will be raised and they'll be paying for the tax anyway). A secondary reason we should tax the oil and not the gas is that we'll hit the whole industry, and not just joe schmoes at the pump. This will reduce consumption of all oil products, and raise tax revenue from many more sources, thus paying down our debt that much faster.

I have two proposals for how to implement the tax, and I'd like to hear some opinions about them.

Proposal 1
We put a 10% or $5 tax on each barrel of oil, whichever is less. For prices over $50 dollars a barrel, we would pay a tax of five dollars, and for prices under that, we would pay less so that it's a smaller ammount of money to be paid at the pump. One barrel of oil is 42 gallons of oil. (there are other interesting facts there, as well) If we refine that into gas, we can get about 28 gallons that will drive your car (depending on the quality of the oil), but many products (like motor oil) can be produced with the leftovers, so lets just say that one barrel of oil will turn into 42 gallons at the pump so that we can see the effect on gas prices, because we know that prices for the rest of the oil derivatives will jump as well and add to our debt paying coffers.
If oil costs $50 a barrel, gas would cost about $1.19 (if we ignore mark-ups and stuff for the moment. KISS). The tax would add about $0.12 (regardless of the mark-ups). This is a pretty steep jump (10 %), but we're trying to reduce consumption here. The US uses about 20 million barrels a day, so this would give us $2,400,000 in revenue each day. The US debt is about 8,344,459,609,733, so we'd pay down the debt in about 3,476,858 days, or about 1000 years. (Obviously we're going to need to do some other things here...)

*I used 50 dollars a barrel for simplicities sake, and with prices currently about 75 dollars, we'd make a little more money each day. (about 18 cents a gallon)

The pros: this doesn't hurt our pocket books as much, but it won't change behavior as quickly. It also will take a damn long time to pay down the debt.

Proposal 2
This one would hurt more, but it would be more effective. We could set it up so that we'd pay 5 dollars or 10%, whichever is greater. For prices less than $50 a barrel, we'd earn exactly as much money as before, but the percentage of the price would be greater (hurt more and better at changing behavior) for prices less than $50. We'd earn a lot more money at prices greater than fifty dollars, so there would be an extra incentive to cut down on oil consumption just when our arab and venezuelan friends are getting more money.

So, which proposal do you like more? And, do you think the whole thing is worth doing? Did I screw anything up? Let me know in the comments.

Side note -> this tax obviously doesn't have to pay for the debt. I just picked that because it is probably my biggest underfunded concern at the moment, aside from Social Security. And paying for people's retirement using a tax on oil just doesn't make sense to me. We could use the money to pay for a fence on our border (if people really want to do that), or we could set it up as the "Porker's Pile" and let congress spend only the gas tax money on pork projects, and once the money is gone for the year, no more pork. But to do that last one, we'd need to make it a much smaller tax.

Also, please notice that the numbers I suggest obviously aren't final, we can scale them up or down...I'll let the wonks decide what's the best level of tax.

One more thing, this tax would make more sense (in the big picture) if we moved away from an income tax towards a sales tax. I like a sales tax because it's not a tax on my labor, it's a tax on what I choose to consume. It just works better with my ideals...but that's a different debate, and this post is long enough.


  1. Hubby of Red5/22/06, 10:45 AM

    First I do not like the redirect I just got with the comments feature.

    Second I agree with your gas tax and also with the idea that it be applied to our horrible debt. Good idea all around. I think that the or greater is the way to go as well. It becomes more of an incentive that way.

  2. What do you mean, redirect?

    And, yeah, the more I think about it, the more I think we should be pushing for it...
    but I don't think this would ever happen...or at least, it won't happen for a long time, and that might be too late to do anything about it...

  3. Hubby of Red5/23/06, 10:37 AM

    I think that there is no possiblility for this as politicians really have few stones when it comes to makeing a policy like this that could bring about a revolution in energy. Unfotunatly Bush will never make any real energy policies that will really bring about an advance in alternative fuels like a national sales tax would. Also I do not think that anyone really wants to take a hard look at the debt and try to actually fix it.

    I was actually thinking about politicians and their lack of stones today. I deceided that politicians do more to get themselves reelected than to actually pass controversal policies that in the end are in the best interest of the country. I think that it is really more about job security than public service for politicians nowadays.

    What I mean by redirect is that it opens a new tab in Firefox. My wifes blog just goes to another page from her blog page to make comments. Yours opens a whole new tab. I find it annoying.

  4. Ah, so, that's what you mean about the redirect...sorry. Hopefully, now that it's summer and I've finished all my exams, I'll have a chance to build the blog some more and try out some new formats...

    You are right about most politicians missing stones. Getting re-elected is definitely their first priority. Not much that can be done about that, however.

    Any new kind of tax would take a lot of work to create. And, the only way we're going to be able to work on the debt is to get more people to realize just how big it is...once you can measure something in terms of complete points %GDP of America, that something is really big. And I think our debt is around 3%(I'm not really sure about that). In relation to other countries, it's not really something to get that worked up about, but our GDP is much bigger than anyone elses, and so is our debt. We can get as much money as we want at the lowest interest rates in the world, and we can probably do it for as long as we want, but just because we can do something doesn't mean we should.

    Also, anything that really works on conservation is gonna have to come from the population. In a way that's a good thing; our government shouldn't really be a trend-setter in terms of changing people's life. It should be listening to what the people want. It can encourage people to do things, but I really don't want a government that decides what's best for me. I want the government to listen to me when I decide what's best for me, and then make it possible for me to do that. Mostly by staying out of my way.

    A sales tax (I talked about the FairTax a while back) is a good way for the government to get the money it needs while leaving people's options open. We can always choose how much money we spend, and if we structure the tax right, one could concievably by the basic necesities of life without ever paying tax...but that's an even bigger project.

    I think this tax on oil is a good way to start. If someone important started talking about it (like possibly a presidential primary candidate), it would at least raise the awareness of the population and get the idea in their heads. Then we might actually be able to do it sometimes in the next fifty years...

    But anyway...