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.
Don't you think that with an increase in the gas tax, people would start to buy less gas. With a decrease in the demand for gas, oil companies would decrease their prices. Supply demand.
ReplyDeleteShawn, demand for gas is largely inelastic. Regardless of a tax, demand changes little with price.
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