Thursday, May 05, 2011

unpopular but wise idea

It is political unpopular to tax--that's a simple and true statement. However, taxing is not only needed, it's sometimes simply useful. If we assume that the purpose of taxing is two-fold (1. to raise govt. revenues and 2. to encourage or discourage behavior), then a gas tax seems like a simple and good idea. For the last three years or so, gas prices have fluctuated wildly based upon political factors. However, what has happened at least twice now is that when gas prices hit four dollars a gallon (give or take), two things occurred: 1. people began to ration their driving and 2. gas prices dropped.

Why? Because we have discovered the point (and there's an economic term for this I'm sure) where consumers have decided that gas is not worth the cost. We are paying the full cost of our consumption. You could even argue that the political cost of our wars and the political environment we've created is being "paid" at the pump.

Is this a bad thing? I say no. Sure, it sucks paying that much at the pump...but if it just means that the costs of our politics are being shared equitably across the board, and it improves overall behavior, then it's probably a good thing.

That being said, I think a gas tax is probably a good idea...and no, not a couple of cents a gallon--if four dollars a gallon is what makes people stop driving as much, increases fuel efficient car sales and lowers the price of gasoline in the long term, then we should do that. We would raise revenue, create jobs (in the car market) lower costs (roads would be less-used and thus need fewer repairs) and we could use the increase in revenue to improve public transportation.

A gas tax is regressive in nature, so maybe a tax credit for lower income workers would be beneficial as well, but in my imaginary world, the revenues for public transport would also most likely benefit the lower income families the most. (As an example, right now a maid who works in downtown Los Angeles has to drive probably an hour to and from work, costing her quite a bit. If we were to have less traffic and a better public transit system, that maid would have to drive less in both distance and time, and her trip could quite possibly be done via public transport instead. So, while she'd pay more in gas, she'd save in the long run by not driving nearly as much).


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