http://www.indystar.com/article/20090204/NEWS08/902040338/1101/NEWS08 Pump primed for gas tax plan [edit-removed paragraphs that didn't mention Lugar] This brings us to Sen. Richard Lugar, who unlike many politicians is not a hostage to the next election. As usual, Lugar is setting himself apart by thinking about tomorrow's issues today. In this case, the Indiana Republican is pushing a proposal to increase the federal gas tax by $1 or more to reduce the number of miles Americans drive and the demand for imported oil. Now before you panic, let me explain the other half of this proposal: Every dollar raised by the gas tax would be sent back to Americans through a cut in the payroll tax, higher Social Security checks or some other measure. Lugar insists this is a crucial selling point. It's a smart plan. After all, there is no denying statistics that show higher gas prices lead to less driving and a reduced demand for oil imports. And, as Lugar recently wrote, "Nearly every major foreign policy challenge we face is aggravated by our continued addiction to oil." As we talked by phone Monday, Indiana's senior senator acknowledged the controversial nature of the idea. Already, his office has fielded calls from angry voters. Most calmed down after being told the plan includes a tax decrease equal to the increase. Still, it's certain to be a tough sell on Capitol Hill. "If you added a dollar when gas was $4 a gallon, people would say, 'my goodness, this is over the top,' " Lugar said. "At $1.71, or $2.71, it's still not very appealing." But, he added, current gas prices provide an opening, and a new administration in Washington could provide opportunity for bold ideas. Moreover, this is not about money. At its core, the plan Lugar supports is about the environment, incentives for Detroit to invest in fuel-efficient vehicles, and national security. "In 2008, our country spent over $430 billion (on imported oil)," Lugar said. "Unhappily, a very large amount of the money goes to . . . countries that on other occasions we find to be difficult if not dangerous." Here's the bottom line: Gas is a bargain today. But ultimately, we'll pay heavily if we don't address our dependence on oil. Why wait until the issue returns to the front page?
Here's a column by Lugar on his proposal. I think it's a brilliant idea from the Republican congressman. I think the Democrats could go for this tax increase also. It's a a gas tax with a cut in pay roll taxes to make up the difference. It's a net-zero tax. Raise the Gas Tax A Revenue-Neutral Way to Treat Our Oil Addiction By Richard G. Lugar Sunday, February 1, 2009 Reality is stark: Nearly every major foreign policy challenge we face is aggravated by our continued addiction to oil. Recent developments in Europe, the Middle East and Africa only underscore this fact. But a new president and changed economic conditions offer the chance to take a bold step toward freeing our nation from the grip of foreign petroleum. In March 2006, I characterized America's excessive reliance on oil as "the albatross of national security." When oil prices soared to a peak of nearly $150 a barrel last summer, oil riches emboldened authoritarian rulers from Venezuela to Iran to the genocidal regime in Sudan. Poor countries struggling to grow were crushed by the weight of oil import expenses. Allies in Europe have gone cold this winter as Russia wielded its near-monopoly on gas supplies as a political weapon. And our own economic woes were exacerbated as we shipped billions of dollars overseas to pay our oil bills. Yet the huge external costs of our oil addiction -- in terms of national security, economic vulnerability and environmental damage -- are not accounted for in the price Americans pay at the pump. Classic economics identifies two basic options to intercede where Adam Smith's invisible hand fails: Governments can regulate to force, or prevent, certain actions. The government also can impose targeted taxes, which are almost always the most efficient, least invasive and most transparent remedy for market failure. ad_icon In the Jan. 5 edition of the Weekly Standard, conservative writer (and Post columnist) Charles Krauthammer made a strong case for a "net-zero gas tax" proposal that would match, dollar for dollar, an increase in the federal gas tax with a decrease in payroll tax, which is paid by every working American. Because it represents no net tax hike, it would bring the benefits of reduced consumption while putting money into the hands of Americans. A gasoline tax is transparent, easy to administer and targeted at the one sector that burns most of our oil. We know it would cut imports. When gasoline prices topped $4 a gallon last year, Americans chose to use less, leading to a major drop in gasoline consumption. The gains from accurately priced gasoline would grow as Americans demanded more fuel-efficient vehicles, chose non-petroleum alternatives to power them and found public transit options that work. Pricing gasoline to reflect its true cost to the nation would help spur a vast market in which oil alternatives such as advanced biofuels would become competitive and innovation would flourish. The auto industry would benefit from knowing that it could invest aggressively in high-mileage technology without worrying that consumers might turn back to inefficient gas guzzlers. We would cut our greenhouse gas emissions, 30 percent of which come from transportation. Adjusting Americans' tax burden to put more spending power into their own hands makes sense when household budgets are squeezed. A revenue-neutral oil security tax would take every penny collected at the pump and put it right back into the pockets of consumers. Options for doing so include cutting the payroll tax, which disproportionately affects the lowest-paid employees, so workers would see extra money every payday. Alternatively, the government could regularly send a check to everyone over 18. I am prepared to work with the Obama administration and colleagues in Congress to devise the most efficient way to return the revenue to the American people, even as we advocate the general policy of a gas tax to promote better cars and alternative fuels. Americans sent nearly $430 billion to other countries in 2008 for the cost of imported oil -- an amount equal to almost half of President Obama's stimulus package. Those hundreds of billions should be spent to build a new energy economy here, not shipped to dangerous regimes overseas. No tax is perfect, and some special provisions may be necessary for individuals and groups disproportionately affected. But we as a nation are already suffering every day from our oil dependence, and decisive measures are needed. The alternative to a net-zero gas tax is ever-greater regulation, with more bureaucracy and the inevitable temptations for lobbyists to exploit regulatory loopholes. Krauthammer's net-zero gas tax proposal identifies common ground for fiscal conservatives, security hawks, environmentalists and America's lowest-paid workers. New York Times columnist Thomas Friedman has argued for similar steps. Whether it is a $1-a-gallon tax or some greater amount commensurate with the true cost of oil, a net-zero gas tax is the type of transformational policy that we could implement quickly and that would have immediate impact. One of the simplest and most effective means available for strengthening U.S. national security is to dramatically reduce our oil dependence. A gas tax that returns money to Americans would take us a long way toward that goal. The writer, a member of the Senate Foreign Relations Committee, is a Republican from Indiana.
This idea has been discussed for quite awhile including 6 mos to a year ago on this forum. I would hardly call it a Republican idea, but it is significant that a Republican, who under Bush was more or less the anti-environment party and the party of burn as much gas as possible, is actually talking about it. It is a very good idea.
If you cut the payroll tax, doesn't that just accelerate the bankruptcy of Medicare and Social Security - those programs are theoretically supposed to be self-sufficient and not dependent on general treasury revenue, right?
I am incredibly skeptical that the democrats could keep their mitts off this money to make it a net-zero tax.
As I understand it, the revenue from the $1 gas tax would go towards the same programs. It wouldn't be going to the transportation fund. There's also a $14/week increase for Social Security payments, so that seniors can get their money back also.
This is an excellent point. Another item of note is that for many individuals that are of middle class income or less, this is far from a net zero tax. Take a worker that lives 15 miles from work and has two kids. They burn 15 gallons a week. That is an additional $15 a week in expense for them. That is $780.00 a year. Unless the reduction in their payroll taxes is $780.00 a year, for them it is not a net zero tax. Some people will come out ahead. Some people will come out behind. I doubt that many, if any, will break even.
For a long time I've advocated gradually raising the gasoline tax over a period of time, perhaps 10 cents/year for 10-15 years. Doing so now would be crazy. Changing the tax code to make such a thing revenue neutral is an interesting prospect but, again, doing it now would be risky.
It baffles me that people even consider crazy ideas like this. You do simple math like Refman's and you can see it never will work, even those who think they may fall on the "winning" side. Think of all the contractors and truck drivers who drive for a living. America simply needs to learn to quit consuming and wasting so much. It would send us in a prolong recession, but the end results would be a solid economy. Our economy has been very fragile for at least couple decades and its really starting to show. Deficits are NOT good. Back on topic, if Americans would cut back a small bit on everything, from travel to home electric use ... small things like mail delivery 3 days a week instead of 6 ... americans investing in green technology. There is so much we can do to cut back. We can do it willingly now or we can do it out of necessity later.
I think that cigarettes need more taxing, it's bad for your health. Did that result in massive quiters, or more govt revenue?
Example of what happens when folks cut down on usage and are more efficient: Quote from CenterPoint Energy rate increase document: "CenterPoint Energy believes this rate filing is necessary for several main reasons, including:... Decreased average customer use because of energy efficiency and building construction improvements."
That is the point of raising the gas tax to cause a change in behavior for those coming out behind. I'm for this and have been saying for a long while that only things like high energy prices will cause any mass movement towards conservation.
But we can lobby the legislature and the PUC regarding CenterPoint's rates. Also if CenterPoint is going to raise their rates they will find that people cut back more on energy use.
Sooooooo increase your usage, say by 25%, will drop the rate? The reality is the rate will go up. The BS is the excuse.
Fuels costs go up. Airlines start adding "a la carte" services (e.g. fees for baggage, costs for soft drinks, fees for pillows). Fuel prices drop significantly. Airlines keep the fees. I keep my thermostat on 66 in the winter and 74+ in the summer (and generally only run the air if the humidity creeps up) yet my rates keep going up. My point is that consumers will tend to see tangible benefits (i.e. pocketbook), offset by companies raising their rates, fees, etc. Granted, by conserving fuel and energy we will see intangible benefits, but do you really think that energy companies (et al) won't start doing what CenterPoint is doing? Due to the state of the economy the past few months, consumers have been spending less, conserving their money. I haven't noticed any drops in the cost of retail goods.
Americans are individualistic and selfish and it takes a crisis to generate any sort of mass action toward what benefits the country. It's ridiculous how many pickup trucks and SUVs are in Houston, but it's part of the culture. Who carres if it helps the enemies of our country line their pockets, right? It's a person's constitutional right to waste as much as they want and this is all that matters.
My work is 25miles away from my house, and my wife may be having a similar commute soon. We drive fuel efficient cars, but still. I don't like limiting peoples ability to travel.
The payroll tax breaks even based on those numbers at $13,000, so even the lowest paid workers would end up with net savings. Personally, I would save thousands of dollars a year since I don't directly pay for gas (carpool and bus). Part of what I like about it is that it is a tax on consumption, which IMO is the best way to tax. I would love to scrap the 15,000+ pages of the income tax code in favor of a consumption tax on new goods. Include an exemption of $5000 for each adult and $2500 for each child in a family and you would also mitigate the regressive nature of sales taxes. Theoretically, people could decide for themselves how much tax they want to pay every year and the system would reward savings rather than consumption.
