Should We Raise the Federal Gas Tax?

Last week, John Deeth wrote that the Car Talk guys think we should raise the gas tax. Their thinking behind this...

"Gas is less than two bucks a gallon. There's never been a better time to do this. If we added a 50-cent national, gasoline tax right now, and gas cost $2.50 a gallon, would that be the end of the world? Hardly."

"This new tax would generate between 50 and 100 billion dollars every year for the treasury. That money could be used to help rebuild our crumbling roads and bridges, and develop new technologies for more fuel-efficient cars... further decreasing demand for oil. This is a way for us to get on the wagon, and stop sending money to countries that don't like us. We could become energy independent."

Tom Friedman comes to the same conclusion in his column yesterday...

Of course, it’s a blessing that people who have been hammered by the economy are getting a break at the pump. But for our long-term health, getting re-addicted to oil and gas guzzlers is one of the dumbest things we could do.

That is why I believe the second biggest decision Barack Obama has to make — the first is deciding the size of the stimulus — is whether to increase the federal gasoline tax or impose an economy-wide carbon tax. Best I can tell, the Obama team has no intention of doing either at this time. I understand why. Raising taxes in a recession is a no-no. But I’ve wracked my brain trying to think of ways to retool America around clean-power technologies without a price signal — i.e., a tax — and there are no effective ones. (Toughening energy-effiency regulations alone won’t do it.) Without a higher gas tax or carbon tax, Obama will lack the leverage to drive critical pieces of his foreign and domestic agendas.

Friedman explains this further...

The two most important rules about energy innovation are: 1) Price matters — when prices go up people change their habits. 2) You need a systemic approach. It makes no sense for Congress to pump $13.4 billion into bailing out Detroit — and demand that the auto companies use this cash to make more fuel-efficient cars — and then do nothing to shape consumer behavior with a gas tax so more Americans will want to buy those cars. As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers.

There has to be a system that permanently changes consumer demand, which would permanently change what Detroit makes, which would attract more investment in battery technology to make electric cars, which would hugely help the expansion of the wind and solar industries — where the biggest drawback is the lack of batteries to store electrons when the wind isn’t blowing or the sun isn’t shining. A higher gas tax would drive all these systemic benefits.

Obama said during the campaign that he would not just tell us what we want to hear, but what we need to hear. I think we might need to hear about the possibility to raise gas taxes.