25 February 2011

Why the U.S. should raise taxes on gasoline

This very informative graph was posted at The Economist.  Most Americans grudgingly admit that higher gasoline taxes could be used to improve transportation infrastructure in the U.S., but there are even broader implications:
Petrol prices in America are substantially below levels elsewhere in the rich world, and this is almost entirely due to the rock bottom level of petrol tax rates. The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

There are any number of good reasons to raise the petrol tax rate. The current rate no longer brings in enough money to cover current highway spending... But a higher tax rate would also diminish the possibility that a sudden rise in oil prices would throw the economy into recession. That would be a nice risk to minimise! And yes, higher tax rates would hit consumers just like rising oil prices. But those prices are rising anyway; better to capture the revenue and use it, all while improving behaviour.

It's hard to take any fiscal hawk seriously so long as this measure isn't on the table. It's as close to a win-win solution as one is likely to find.
Via The Daily Dish.


  1. So, according to the report, Europeans think that the US is paying too little for gas. This report would be far more accurate if it included the rest of the world...why pick on the US?

    ..just my $3.92

  2. Trouble with a gas tax is that it's regressive, hurting low-income people far more.

    --Swift Loris

  3. A floating tax that kept the price pegged somewhere (relatively) high would be nice for calculating future gasoline expense. It's ridiculous how any country with 2 oil fields has some trouble and the worldwide supply jumps up in price.

  4. Has anyone information about gas prices in China? Afair it's much less than in the US...

  5. That win-win does get passed along in the form of higher prices, as those of us who live in Hawaii and have everything brought over in cargo ships will tell you. It's a good idea, but not without pain.

  6. who gives a damn what they pay? why would any intelligent person want to pay more for anything? Stupid article. Must be one of those dumb green people who think they are doing us a favor by pointing out facts they scurry about finding. What about the price of corn? should we raise it since it the price is so low here? if we paid so much for the war why should we pay more for gas? Then these idiots quote their credentials as economists and expect people to go along with their plan. Just plain stupid.

  7. Another benefit of higher gas prices: more efficient cars. As a Dutchman (apparently paying the highest taxes) I have always been surprised by the sheer number of stupefyingly humongous cars touring the streets in the states. Sure it is nice to have a 4x4 when you live in a rural area, but what do you use it for when you live in a city like LA or New York (forget parking a hummer in amsterdam). In the Netherlands cars with a decent mileage (54 mpg) are exempt from paying road taxes.

  8. ha, it's so funny the way that Americans react to taxes... and every time someone brings up taxes... you'll do anything, vote for anyone as long as you're promised less taxes never-mind everything else as long as the president doesn't raise taxes he/she is aces.

  9. I'm a US Expat living in a country where gasoline costs over $8.50US per gallon and if the EU hadn't financed our new highways we'd be driving on washboards dodging proto-caves!

    What makes any logically thinking person that increased in taxation on private transportation is going to go to improving America's roadways?

  10. All the countries to which the U.S. is being compared are significantly smaller in geographic area - a tank of gas covers much more of the country. Our country is bigger, distances are greater. Of course we're going to use more oil. And paying for my own gas to drive my car makes me independent - whereas government-subsidized, tax-funded public transportation takes that away. When power-outages and other disasters strike, who are the people who get stuck at work, miles from home? Two main groups: those who use public transportation, and those who don't have enough gas to get home.
    Additionally, the amount of oil available to us in this country would, if Congress, the EPA, etc., would allow us to use it, very likely render us nearly independent of the oil production in other countries.
    Why does it matter what people in other countries think about what we pay for gas? Do they really want us to pay more, or are they just jealous that they don't get to pay less? Of course, I saw Krispy Kreme donuts priced at the equivalent of $2 per donut when I was in London a couple of years ago. Should we pay more for brand-name donuts, too? (I wouldn't - they're not that good!)
    Also: higher taxes won't stop gas prices from going up. They would just add on to the high cost.


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