Should The Federal Gas Tax Be Increased?

With the ever growing budget deficit, politicians are searching for ways to raise revenue for the government. One of the suggestions made is to raise the federal gas tax. As of now, the federal gas tax profits go towards funding the Highway Trust Fund, which distributes money to pay for highways, bridges and other infrastructure projects. The last time Congress increased this tax was in 1993, when it was raised to 18.4 cents per gallon. As imagined, with time, this tax value goes down in impact and in order to account for inflation, Congress would have to raise the tax considerably. The question now is weather this would be a reasonable burden to place on American citizens with the gas price already approaching $4.00 in most states.

If you'd prefer to watch a video, here is a good link for a little more background information...

In this blog we will be debating both sides of the story. We invite you to take a look at the information we’ve found for reasons to be against increasing the Federal Gas Tax and reasons to be for increasing the Federal Gas Tax. For some more background information on the Federal Gas Tax, please feel free to visit the USDOT Federal Highway Administration’s website for a comprehensive history of the Federal Gas Tax.

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The Gas Tax and the Environment

According to the National Association of Convenience Stores, the number one supplier of fuel in the US, the demand for gasoline in 2011 is expected to reach over 9 million barrels per day. This comes as little surprise, seeing as how the United States alone accounts for almost a quarter of the world’s oil consumption. Most Americans rely heavily on private vehicles as their main form of transportation. Owning your own car is a quick and convenient way to get around and has become a major influence in American culture. The problem, however, is the fact that in this country, the average person emits nearly 20 tons of CO2, totaling over 5.9 billion metric tons of this greenhouse gas pumped into the atmosphere.

Compared to other developed nations, and many less-developed ones, the United States isn’t doing so well in terms of environmental policy, either. Currently, we rank 61st with a mediocre 63.5 out of 100 points on the Environmental Performance Index, a system that tracks and compares the environmental policies and performance of 163 nations. In spite of this, little is being done to remedy the situation because it’s difficult to balance the environmental, political, and economic factors that come into play. That’s where the gas tax can help.

Remember the summer of 2008 when gas prices across the country jumped the $4 mark? Motorists across the country who were feeling the pinch learned to adjust by using more public transportation, driving less and downsizing, or even getting rid of, their gas-guzzling vehicles. Not surprisingly, emissions from petroleum fell by 6% that year. Though that might not seem like much, that means 165 million metric tons of CO2 were saved from the atmosphere.

It is clear that the United States consumes and pollutes far more than its fair share and the most effective way to alter that behavior is to use a market approach, and the gas tax fits this criteria perfectly. Because the tax is a government-imposed fee, as opposed to a fluctuation in the worldwide economy, there would be a much more consistent and significant reduction in our carbon footprint. We need to send market-based signals that make it clear that we are in favor of switching over to greener, cleaner, more sustainable ways of life.

The Gas Tax, Energy Independence, and the Middle East

It’s no secret that the United States is heavily dependent on oil produced in the Middle East. In fact, entire wars have been fought over it. It’s also no secret, though, that many of these Middle Eastern countries we depend on for oil are controlled by dangerous political regimes and as such, their citizens are experiencing intense instability. This is especially apparent now in the wake of the political shocks that are occurring in several oil-producing nations in the Middle East right now.

Part of the reason that Arab countries today are so unstable is because their economies are primarily based on oil and are especially susceptible to fluctuations in oil prices. This amount of uncertainty is not good for either country involved or for the fuel market. Gas prices have risen 20 cents in the past few days and 68 cents in the last year as a result of the social and political upheaval in the Middle East and North Africa. As this geographical region becomes more and more volatile, no one can say for certain when, or if, these prices will ever come back down.

This is a fact that has led many to rethink the future of American energy. Since most politicians serve relatively short 2- or 4-year terms, many have shied away from long-lasting solutions to the country’s current energy crises. Their response so far has been to open up strategic oil reserves or increase off-shore drilling at home. These strategies are only temporary and it’s time to implement a long term solution. Raising the gas tax would send a clear signal to the country and the rest of the world that the United States is ready to move past its reliance on oil from the Arab world.

If the Middle East did not have as much of this limited natural resource as it does, the United States would probably not be interested in it all. In fact, the military involvement in Iraq, and now in Libya, was largely over the control their oil, although politicians have worked under the pretense of liberating a struggling country from a brutal dictator. If the United States decreased its reliance on oil from the Mideast, and ultimately pulled out of this region altogether, these countries could begin working towards genuine freedom and stability on their own. Diplomatic relations between the United States the Middle East would improve as each country would not be working with a hidden agenda.

As we have seen, sustained independence from foreign oil sources is but one of many benefits of raising the gas tax in the United States. In order to create cooperative political ties, preserve our environment and natural resources, promote technological advances associated with energy independence, and stabilize our fuel economy, it is vital that we end our oil addiction. And the gas tax is a step in the right direction.

http://www.edmondsun.com/opinion/x977550636/Pain-at-the-pump-will-continue

http://www.csmonitor.com/Commentary/the-monitors-view/2011/0225/Cure-for-Middle-East-oil-shock-A-higher-US-gasoline-tax

http://blogs.phillymag.com/the_philly_post/2011/03/22/u-s-involvement-in-libya-is-all-about-oil/

The Gas Tax, It's Purchasing Power and Our Economy

The transportation system in the United States is funded primarily by state and federal taxes. These taxes provide about 90 percent of the funds in the Highway Trust Fund and a substantial part of state transportation budgets. Unfortunately, increasing gas taxes has proven to be extremely difficult, even though with taking inflation into account, these taxes effectively go down in impact every year. Though the federal gas tax accounts for a large portion of what pays for highways, bridges and other infrastructure projects, its value has remained at 18.4 cents per gallon since 1993. Since this increase, the purchasing power of the 18.4 cents has declined by 33 percent. The Political Cartel Foundation suggests that if we were to account for inflation, Congress would have to raise the gas tax by 7.6 cents just to keep it at the same purchasing power it was in 1993.

In its history, the federal gas tax has only been increased three times in the last 40 years. The lack of increases in tax revenues, along with increased miles traveled by vehicles, most of which are even more fuel efficient, has led to a massive funding shortfall for the transportation system. In fact, the current estimated shortfall between gas tax revenues and expenses is between 20 and 70 cents a gallon. The National Surface Transportation infrastructure Financing Commission reported that the funding gap in the Highway Trust Fund could reach $2.3 trillion over the coming 25 years.


As you can imagine, this has definitely put a damper on the repairs of our transit infrastructure seen in the many crumbling bridges and potholes around America. After the collapse of Interstate Highway 35W bridge in Minneapolis, Minnesota, a report announced by the Federal Highway Administration showed that about 25 percent of all 603,245 U.S. public road bridges are classified as deficient. According to the Department of Transportation, an immediate "cost-beneficial" investment aimed at replacing or repairing deficient bridges might cost nearly $99 billion.

Greg Mankiw, a professor of economics at Harvard University suggests that a one-dollar increase in the gasoline tax would generate $100 billion dollars in revenue in just one year. Not only could an increase in the federal gas tax greatly help repair our roadways, but it could also help pay off the deficit and economic bailout currently facing the US government. As these bailouts are used to stimulate the economy, hopefully they would be able to more than offset the impact of high gas prices would have on the economy. It is possible that these bailouts could create more jobs, make tax cuts for businesses, and reduce the demand for fossil fuels by increasing public transportation and increasing research on new sources of energy. If spent correctly, this gas tax should in fact give a boost to our economy.

Increasing Gas Tax ≠ Increasing Consumers’ Burden

According to a New York Times article, one of the major
concerns of increasing gas tax are increased burden of consumers and hence
hurt the economy. Americans are generally opposed to raising the federal tax
on gasoline, but a majority would support a gasoline tax increase if they knew
the money would be used to reduce global warming or to lessen United States
dependence on foreign oil, according to a New York Times/CBS News poll
conducted in late February 2006.

Economists Urge Lower Income Taxes to Offset Gas Tax Increase
According to The New York Times, many mainstream economists believe
that the best way to reduce gasoline consumption is by raising the gas tax
significantly—perhaps $1 per gallon over five years—while lowering income
taxes to offset the added cost. The goal would be to force people to drive less
because of the increased cost of gasoline, but to reduce the overall financial
impact with the offset, which many economists believe would actually improve
things for most low- and middle-income people.

While many economists may support the idea of offsetting a gasoline tax
increase by lowering federal income taxes, people who responded to the poll
were not wild about the idea. Only 28 percent said they would support a gasoline
tax hike if their income taxes or payroll taxes were lowered to provide an offset.

Even so, many experts believe raising the federal gasoline tax could go a long
way toward reducing America’s gasoline consumption.

Raising Gasoline Taxes Would Lower Gasoline Consumption
According to Severin Borenstein, director of an energy institute at the University
of California, Berkeley, a 10 percent increase in gasoline prices would reduce
consumption by 6 percent to 8 percent over time.

On the other hand, if the price of gasoline went down, people would be less likely
to buy fuel-efficient cars, relocate to be closer to their jobs, or look for other ways
to reduce their commute, their use of gasoline and, ultimately, the greenhouse
gas emissions that contribute to global warming.

Source: http://environment.about.com/od/environmentallawpolicy/gasolinetax.htm

Critique for Julia Anderson

Gas tax, as a mean of price control for gas, is an effective way to adjust supply
and demand in gas. As price goes up, people decrease gas consumption and
therefore price of gas will go down. Then demand of gas may go up again but
will maintain at a certain level as the price reaches equilibrium. Because of the
tax control, gas demand can be controlled and consumers get less hurt by the
increasing crude price as they lessen their dependence on gas.

As far as raising price and using part of the tax revenue to pay for roads damage,
I think it makes perfect sense to me. Gas is a necessity and a large portion of
gas demand won’t change because of the raising price. Therefore, there is no
worry for the huge drop of gas consumption, which has no effect on collecting
money for road maintenance.

One of the New York Times articles mentioned that two
senators have called for a 25 cent rise in the federal gasoline tax to pay for road
and bridge construction and maintenance and debt reduction. They suggest that
10 cents of the increase go toward paying down the debt, and the rest toward
transportation infrastructure. This indicates that a significant portion of tax income
will be used to cover debts, which will help the economy to recover.

As far as the job loss, I wonder how the statement “Initial losses of over 154,000
jobs by the end of 2011, not only in the energy sector but across the whole
economy” is deduced. I can’t this huge shock to employment rate because of
25 cents increase in gas. Meanwhile, raising gas tax creates job opportunities
as part of tax income is used for road maintaintence. If we want the economy
to rebound, we must increase investment in our transportation system. We are
faced with the decision of paying now, or paying even more later. Every $1 spent
now to keep a road in good condition prevents spending $6-$14 to rebuild the
road once it has deteriorated. There are other alternatives the government can
use to support small business, using the gas tax income. Therefore, I think the
actually effect of gas tax is not as server as mentioned in the second article you
quoted.

Anti-Gas Tax

As gas prices are soaring, many people are wondering where they think we are getting the money to pay for this! It seems that the gas prices continue to rise. Although we know that with the gas tax increase many Americans will be pushed off the roads because they just cannot afford to drive. There are many that will just tighten their budget on other things so that they can still drive.

The first thing that the gas tax affects is the economy. Not only does it take the money away from me by having to pay more for gas, but it increase the amount of we will have to pay for everything else. For example, there are many small businesses that rely on transportation in order to make their business run, how do stores and restaurants get their food? Most of them are delivered by some sort of truck, and of course, these trucks will have to pay more money for gas just like us. This means that the prices of the food we get there, the clothing stores etc will also have to go up. So, we pay more money for not just gas, but many other things.

The gas tax will also affect the government. In an article on the New York Times, Kate Galbraith wrote, “Yet for governments, the trend has a distinct downside: their fuel-tax receipts will dwindle, because drivers will buy less gasoline.” The government thinks that they will be making money, but it will be hurting them. It also will affect how people choose their leaders. The stance on the gas tax may be an issue that will be addressed now as part of a political campaign.

These are some of the points that we hope to hit in this blog! More may come up or we may not get to touch on all that we want, but hopefully this gets you thinking about how the gas tax will affect you!

Gas Taxes: Ineffective AND Unfair.

                It has been well established just how dependant America is on fossil fuels for both personal and economic transportation.  While it is easy to say that we need to do something different to reduce our dependence on this non-renewable resource, it is harder to say how.  Unlike many I don’t believe that raising taxes and essentially extorting American citizens and businesses into change will be effective.  Instead, I believe that Americans need and deserve to be presented with a viable, economical alternative before being punished for our current life styles.  As David Roberts of grist.org says;”The solution is not more virtuous behavior or slightly more fuel economy, but new infrastructure.” 

                American citizens have been conditioned and encouraged to use a disproportionate amount of fuels through decades of poor urban planning and even worse development of transit options in most major cities.  It is unfair for our government to turn around and punish the behavior that it has for so long encouraged, especially given the current economic climate of our nation.  The government needs to step up and establish a new standard to rise to, and then support it.  For example, if Plug-In Hybrid vehicles were decided to be the most effective (they likely would be at this point); the government needs to provide an enhanced power grid, and subsidies to provide Americans charging stations at their homes and businesses. 

                Simply raising taxes to punish our supposedly “irresponsible” habits is wrong and would hurt the poorest with the fewest options to change.  Being a commuting student at the U of M, I can personally attest to the impact more expensive gas would have.  While I do not live terribly far from campus, it would take me over an hour, and 3 separate busses to get to the University by public transit, as compared to 10-15 minutes by car.  It is not reasonable to expect me to give up 1.5 hours of my day just to save a gallon of gas.  I drive a mid-sized SUV, so the volatile gas prices hit me more than many others.  While I would like to downsize and drive a more efficient vehicle, it is not possible for me given my finances as a student. 

                With prices for everything continually going up and wages remaining flat or declining, Americans lucky enough to have a job should not be oppressed with excessive taxation on gasoline just to get there.  It is also important to understand that even if money is no object, the number of alternative fuel vehicles on the market is extremely slim and they do not meet the needs of many Americans.  It is not fair to penalize people for not adapting to technologies that have not been developed to maturity.

                These are just some of the many reasons I oppose the increase of gas taxes as a tool to reduce oil consumption.  Once new technology is there and accessible, I will gladly adapt.  Until then, I will keep on driving my “gas guzzler” because I have no other choice.

http://www.grist.org/article/against-a-gas-tax1

Anti-Gas Tax and the Economy

Nobody enjoys being taxed, no sane person anyways! But, there are taxes that are necessary, but when do they stop? I want to discuss how the gas tax negatively affects our everyday life. The times have been hard for everyone, so saving money is good. But will the gas tax really help us save money? I don’t think so! There are many things that are not thought about when people discuss the gas tax. To start the discussion we will start right in your own pocket! How will the gas tax negatively affect the economy not only for the whole, but for you!?

An average American car gets around 22.4 miles to the gallon. This means that with the gas tax increase, and prices nearing $4 per gallon. This means that with the gas tax, I will have to pay a total of $4 per day just to get to school. On average, each American drives 29 miles per day according to the Research and Innovative Technology Administration Bureau of Transportation Statistics. When gas taxes increase, a big hole is made in all of our pockets.

Another reason that we think we should not raise the gas tax is because it decreases the amount of money that the actually gas station makes. When the customers have to spend more money on the gas, they have less money to spend on the things inside the store. The things bought from the store itself, is what helps them profit. The gas tax could lead to gas stations closing because they are not receiving much profit, where do we buy our gas then? This also could lead to a loss of jobs, where would these people be moved to? Now that they have no job, how do they get money to pay for gas? According to Save U.S. Energy Job, Obama’s Proposed Oil and Gas Tax Hikes to Cost U.S. Economy 154,000 Jobs in 2011! Does not it seem like in the long run an increase in the gas tax will be a chain reaction of bad events?

People say that we will become more dependent on other sources of transportation. But if you think about it, right now to ride a metro transit bus it cost $3 during rush hour. That’s the price with gas where it is at the moment, if we make a major increase in the gas tax, would not it make sense that the bus companies have to higher the bus fares as well? So will it actually be cheaper for us to take the bus? Or will every one still want to be on the road? Also, the gas tax will affect everyone. Everything that is transported takes fuel to get it on the shelf or to its owner. This means that if we increase the price of gas, there would have to be an increase in clothes, food, etc.

These are just some of the ways that an increase in the gas tax will affect the economy. There are more of course, it seems that there are always ways to complain about where our money goes to. But why would we need yet another one? As we have said, the gas tax leads to a chain reaction of price increases, all of which we can’t afford!

http://www.americansforprosperity.org/060209-gas-tax-hike-bad-idea

http://www.saveusenergyjobs.com/2010/09/lsu-professor-warns-against-energy-tax-proposals/

A rebuttal to Greg Mankiw.

I found an interesting article related to our debate; “Raise the Gas Tax” by economist Greg Mankiw. I found that I disagree fundamentally with Mankiw’s article. He advocates raising the tax by $1 over 10 years. While Mankiw’s point about benefits to the environment is valid, he fails to acknowledge that the tax increase, combined with the constant increase of crude oil prices would deal a double-blow to our economy, a strange omission for a leading economist.

Mankiw’s next argument is that, if other people drove less, he wouldn’t have to wait in traffic as much. A perfect example of how an increased tax would disproportionately affect less affluent people. In Mankiw’s mind, he is entitled to drive to his heart’s content, since he can afford the tax. However, the average folks be damned and get off the road!

Later, Mankiw says that increasing the tax would actually grow the economy, because consumption taxes are better than income taxes. This is indeed true, but no one is suggesting that we lower income taxes to correlate to the increased revenue from gas taxes. It has come to be known over the centuries that taxes frequently go up, but rarely (if ever) go down.

Mankiw’s final argument is that it would increase national security. Another way to increase natural security related to oil would be to simply take more advantage of the resources we have sitting right under our feet and waters here in the US. It is also important to keep in mind that the US already produces an almost equal amount of oil to Saudi Arabia, and Russia, a neutral country, produces more than either of us!

While Mankiw is an extremely intelligent economist, he seems to have gotten this one wrong and seems mostly focused on himself.

http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto.html

What's the reason for the Gas Tax?

An article in Time about the gas tax mentions that the roads are in great need of help and the way that they are paid for is through the gas tax. And the other members in my group stated about how the gas tax will help the economy. But I want to ask, what really is the gas tax trying to do? If you’re raising the tax to help the environment that means you’re asking for people to use less gas. But, the point of raising the gas tax is to pay for the roads. In this article at, http://curiouscapitalist.blogs.time.com/2010/06/09/is-it-time-to-raise-the-gas-tax/#ixzz1HIOG0I2G, it’s said that the Highway Trust Fund is bankrupt and we need to pay for the roads somehow. But now we have two things happening, raising the tax to make people get off the road, and raising the tax to help the roads. I firmly believe that if you kick enough people off the roads and get them on busses, the gas tax will NOT help the roads as much as everyone is wanting because now we have less people buying gas. It seems that we are not sure what the gas tax is really going to help, and before we tax people on yet another thing we should be positive of what it will help. Now both of these things seem to be helpful to something else, but these sources and the rest of America aren’t looking at the bigger picture of whom and what will be affected. Especially how many jobs will be affected, to see this you can link to http://www.saveusenergyjobs.com/2010/09/lsu-professor-warns-against-energy-tax-proposals/. And this is one of the reasons why I believe that this article and others are short of evidence.

In yet another article, we are told that a $2 gas tax would generate $750 million dollars a day! This we know will pay for A LOT of stuff that is definitely needed, but who has money to pay for a $2 gas tax? This is not a reasonable argument at this time, America has been in a recession and that means that most everyone is having hard times, and will not be able to afford the gas tax.