Foreign Policy

Gas Taxes as Warfare By Other Means

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At Culture11, William Yeatman and Jeremy Lott apply some pressure to recent right-wing calls for a "revenue neutral" gasoline tax hike, to be offset by Social Security tax cuts. Advocate Charles Krauthammer paints it as, among other things, a great national security move, as it would supposedly starve such nasty nations as Venezuela and Russia of gas money by pushing Americans to adopt more fuel efficient vehicles.

But would it starve those beasts?

We have some idea what would happen because the Energy Information Agency's 2008 International Energy Outlook models future gas prices in a world in which the US somehow achieves 35 miles per gallon by 2020. This decrease in demand doesn't do much to bring down gas prices.

Why not? Because, the report tells us, long-term "growing demand" in poor countries is by far "the most important factor affecting world [gasoline] consumption." Two billion people in India and China dream about driving big cars that use a lot of fuel. Their demand ensures that oil will be a profitable business no matter how much the US conserves.

While American austerity could make global demand lower than it otherwise would have been, we do not have the power to tax ourselves into lowering overall global demand such that oil regimes are going to find themselves facing crippling revenue depletion.

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  1. If the government would just produce the electric efficient cars that the corporations are keeping off the market then we would not be killing the planet with oil.

    If we share these vehicles with other countries they could advance like us.

  2. Yet another person who want government to live your life for you. Hey, Cabbagemallet! If you don’t like gasoline, stop buying it!

  3. Nonsense. We need to drill here, drill now, and subsidize!

  4. I think the real question for Krauthammer is how will this help wipe the Palestinians off the map?

  5. Yet another person who want government to live your life for you. Hey, Cabbagemallet! If you don’t like gasoline, stop buying it!

    Way to go Commander Grammer.

  6. Another example of the new, Palin-esque GOP, no substance or priniciple, and stupid fucking policy…

  7. But, but what about our Right to Low Gas Prices?

  8. Two billion people in India and China dream about driving big cars that use a lot of fuel.

    A point I’ve brought up in global warming threads. The energy poor people of the world are not going to exchange the benefits of technological civilization for reduced CO2 emissions. Nor or they going to do so to punish Saudi Arabia, and Hugo Chavez. You can prech, hector, convince the entirety of the developed world about the benefits of reducing energy use and it is not going to change the fact that developing nations are going to pursue the most economical way of generating heat, electricity and transportation.

    I see it as immoral to ask/demand of them to forego or reduce the benefits of technology for their own people. They see it that way as well. Energy use drives economic developement and ~3,000,000,000 people people are energy poor. They are understandably unhappy with the situation.

  9. But, but what about our Right to Low Gas Prices?

    Has it only been 6 or 7 months since that whole thing about gas tax holidays and how families *need* cheap oil and to drive their Tahoes a quarter mile to pick up a half gallon of price-manipulated milk?

  10. Yes, demand from developing countries will eventually push oil prices much higher, that’s why it’s even more important to get the American economy ready.

    Things like a net zero gas tax will help reduce depedence now, and keep the price of oil lower than what it otherwise will have been.

    A net zero gas tax won’t solve our oil problems but it’s a step in the right direction.

  11. Reinmoose, why do you hate America?

  12. I’m going to mod my H2 to burn dirty coal just to spite you all! HA–*cough cough*-HA!

  13. I’m surprised that not many people around here have brought this up (not so surprised it often escapes the selective scrutiny of left-leaning Malthusians), but why would depriving countries with corrupt and oppressive regimes of one of their primary sources of national income be a virtuous proposition per se. Attempting to isolate a country that already deprives its people of certain liberties from a base of macroeconomic prosperity does not have a great track record (Cuba), whereas the contrary approach has proven to affect gradual liberalization (China). In addition, it seems rather morbid that many advocates of this approach fixate upon the middle east, Venezuela, and Russia (not a dictatorship yet, last I checked), and fail to acknowledge the complex facts of our actual oil trade – we only buy our oil once it has been sold on the world market, and most of it actually comes from Canada. So the argument is morally, and logically pretty weak tea.

  14. cal, if you had said weak sauce instead of tea I’d be 100% with you. as it stands, only about 98%, still an A, but not perfect.

  15. +1 to what Cool Cal said. Lots of countries produce oil. It’s very economically naive to imagine that we even have the capability of hurting the economy of a select couple of them by reducing our oil consumption … not that it’s obvious that’s a good course of action in the first place, even if it were possible.

  16. Gas taxes are a 2nd-best policy with these priorities. If you hate foreigners and their oil, you tax oil imports.

    Even better, wouldn’t it be more straightforward to nationalize the petroleum industry while making every foreign oil exporter mad enough to incite another oil embargo? If the foreign policy part doesn’t pan out, just ban petroleum imports outright.

    Then the government could pocket monopoly profits on the entire vertically-integrated industry while the soon-to-be doddering firm runs itself into the ground in the name of Energy Independence, the War on Terror, the Family Farm, etc.

    Furthermore, the resulting inefficiencies from protectionism will create JOBS!

    Pussy-footed GOP’ers with their half-measures and “revenue-neutrality” make me yawn.

  17. Furthermore, with enough effort on the above efforts we can make gasoline less efficient and more expensive than ethanol, rather than waiting for the ethanol industry to improve! It’s all relative in these comparisons, isn’t it?

  18. Actualy Cool Cal,

    It’s been shown that the price of oil and the amount of freedom are invesly related. IE, when oil is down countries like Saudi Arabia etc allow greater reforms and freedoms, when it’s high they feel free to act authoritarian and repress freedom.

  19. Even if you don’t think it will cripple our enemies (and I agree) or stop global warming (probably) a gas tax deals with externalities. Higher price of gas=less drivers=less congestion which means less time wasted and lower insurance rates since less cars will result in less accidents. Its preferable to almost every other tax.

  20. Want fewer drivers and less congestion, PFJ? Ration driver’s licenses.

  21. Higher price of gas=less drivers=less congestion…

    You forgot “=fewer people doing what they want to do”.

    We should of course strive to see that the price of driving equals the cost of driving. However, taxing gas with the explicit goal of decreasing driving is wealth destroying: It penalizes the first order good of driving for the sake of the second order good of congestion.

  22. Oh, how about something just totally crazy I had kicking around in my mind . . .

    If we must have sales taxes how about making them all the same rate!?!?!? Cigarettes, gas, diesel, pot, cocaine, bottled water, coffee, burgers . . .

    Yea, silly idea huh?

  23. You are crazy, Guy Montag. Economic distortion is the POINT of sin taxes.

  24. “A net zero gas tax won’t solve our oil problems but it’s a step in the right direction.”

    A step in the right direction would be to get the government out of the social engineering business.

  25. “You are crazy, Guy Montag. Economic distortion is the POINT of sin taxes.”

    I thought political grandstanding and redistributing wealth for vote buying purposes was the point of sin taxes.

    But I guess they all sort of go hand in hand.

  26. Nah, they don’t do a lot for wealth redistribution. The income and corporate income taxes do the heavy lifting there.

    In fact the whole revenue argument is over small change. You could recoup all excise taxes with a few points change to the income tax, if you want to be all “revenue-neutral” about it.

  27. “Nah, they don’t do a lot for wealth redistribution. The income and corporate income taxes do the heavy lifting there.”

    They may not do a lot for it, but they sure do contribute to it.

  28. some fed,

    I am getting less and less ‘positive’ about the income tax anywhere.

    Then again I really don’t like sales/consumption taxes either, but those are the two that I can tolerate.

  29. In that vein, I’d be interested to see statistics for excise taxes as a percentage of expenditures among the poor versus income taxes. Flat taxes like excises are regressive after all.

  30. If we must have sales taxes how about making them all the same rate!?!?!? Cigarettes, gas, diesel, pot, cocaine, bottled water, coffee, burgers .

    Unfair. Pot and cocaine prices are already too high. Please think of the children. You should not tax things that already have risk pricing. Now if the tax eliminated the risk of illegality, that would be OK.

  31. What I meant was sales and income are two that I can stand.

    You use “regressive” as if it is actually bad. In reality it is good and as fair as you get.

  32. Nevermind. With the EITC it’s a given it’s a larger percentage.

  33. “You use “regressive” as if it is actually bad. In reality it is good and as fair as you get.”

    Indeed.

    Liberals are always throwing out the term “regressive” as if that constituted proof of gross unfairness.

    It’s nothing of the sort, of course.

    The poor pay a “regressive” percentage of their income to everything they buy compared to a upper income individual – their electric bill, hamburgers, lawn mowers, etc. etc. So what? – So nothing. They received the product or service and they had to pay the same price for it just like everyone else. Nothing at all unfair about it.

  34. Advantages of raising the gas tax (and w/o revenue neutrality):

    1) we need the money; this tax increase is likely to put the least drag on the economy of any other revenue stream. Granted, as said before, it’s relatively small beer (about 1% of the federal budget); nonetheless, even before the mother of all stimuli was conceived, the trust fund was in the red.
    2) Gas prices are at a multi-year low; this is the perfect time to do it to be countercylical. Also, the higher is goes now, the more room for a ‘holiday’ later.

    Why it won’t happen:
    1) enough republicans will oppose because it’s a tax increase
    2) enough democrats will oppose because it’s a regressive tax increase.
    3) it is, by most interpertations, a violation of the pledge by Obama not to raise taxes on families making less than 250K. (although if Obama signs the cig tax increase, he will have broken this already)

  35. You use “regressive” as if it is actually bad. In reality it is good and as fair as you get.

    Oh, I just like the argument that goes as follows:

    A. If you like progressive taxation, you diminish incentives to increases in productivity and create a poverty trap where the poor are worse off the harder they work. Why do you hate poor people?

    B. If you like regressive taxation, you think the poor should pay the same or greater proportion of their income than rich people for the same services. Why do you hate poor people?

    Then you ask where that leaves taxation.

  36. I’m sorry about that unclosed tag, Glibert Martin.

  37. Yah. I can hardly wait to see the post facto spinning of Obama’s cigarette and cigar tax increase.

    I predict he’ll get around it by saying that, on net, he’s still sending the po’ folks more money than he’s taking from them.

  38. CIGARS!?!?!? HE IS GOING TO TAX CIGARS TOO????

    Wait, I buy black market cigars usually. Never mind.

  39. “I’m sorry about that unclosed tag, Glibert Martin.”

    I was wondering how my post got merged into yours.

  40. For reference, Gilbert Martin’s name is a link to the results of the Consumer Expenditures Survey by income quintile.

    How do changes in excise taxes affect black market prices? An increase in taxes drives both demanders and suppliers to the black market. On it’s face, the affects are ambiguous–probably depends on elasticities.

    I hate elasticities.

  41. sf,

    True it does, but if the taxes are at a reasonable rate then the trouble of going to the black market is more than just paying the tax or a black market of any substance does not form. Or both.

  42. @ Gilber Martin
    Asking government to stay out completly ingores the fact that often times government intervention in the market is necessary because of market ineffciencies that make everyone worse off. Monopolies are a prime example. Without regulation, or a breakup to create competition everyone is worse off (except the monopoly holder of course).

    In general I like the less regulation the better. But to suggest that there is never a case where things could be made better with a bit of intervention is to ingnore reality and the facts on the ground.

  43. sf,

    A good rule of thumb is if there is a black market then the taxes are too high. Could be something else, like “unfair” trade practices, but it is usually taxes.

    K,

    Take your monoply myths and blow them out your ass.

  44. Wait, so your telling me that competition is bad, and monopolies are good? Really???

    I’m hoping your joking, but by your rude tone, I doubt it. Maybe you should do a bit of reading next time before you speak about things you don’t understand. Or at least try and make an argument out of it.

  45. Monopolies are a prime example. Without regulation, or a breakup to create competition everyone is worse off (except the monopoly holder of course).

    Name one monopoly, not supported by the state, that made everyone worse off.

  46. MikeP,

    You got to it before me.

    Plus, in a free market (even in a perfect market) a monopoly is fleeting as competitors overcome non-governmental barriers to entry.

  47. K,

    No I was not joking you disgusting bag of puss. I am for competition and against government imposition that creates monopolies.

    Are you the next Eisenstein?

  48. This argument only makes sense if you assume that the entirety of the reduction in American consumption comes in terms of less activity, and our public- and private-sectors don’t respond to the higher prices by producing innovations in energy efficiency, conservation, and alternative energy technologies which can themselves be adopted by developing nations.

    In other words, you have to believe that people in developing nations are gong to adopt the internal combustion engines that require them to purchase lots of oil, but not solar panels, wind farms, and fuel cells.

    Pretzel logic.

  49. People in developing nations might adopt 105-year-old technology rather than much more expensive 5-year-old technology? Who could have thought it!

  50. If you are for competition, then you have to at times be for government intervention. The breakup of companies like AT&T removed monopolies and increased competition thus spurring inovation, increasing consumer chocie, and bringing down prices.

    You see monopolies can and do create themselves all on their own without government intervention. When that happens it is usually in the best of interest of everyone to break it up.

    Again, why the anger and the rudeness??? Maybe go smoke a joint, or drink a beer and calm down 😛

  51. The phone company?

    That’s your example of a monopoly not supported by the state?

  52. MP,

    People in developing nations might adopt 105-year-old technology rather than much more expensive 5-year-old technology? Who could have thought it!

    They do it with phone technology all of the time. The issue here is what works best at an affordable price.

    K,

    You flaiming retarded bag of puss. The federal government MADE the Bell System long distance monopoly. The Bell System ASKED to be a competitive firm and that resulted in the “break up”.

    You must be from planet Cuba or perhaps Yale (no offense K M-W).

  53. K,

    I am drinking a beer (checking bill, yes my 3rd), I do not smoke pot but do not mind if others doo off of my property and I wish you would stop by so I can bust a bar stool over your ‘brain’ case.

  54. My comment about AT&T had nothig to do with creation, merely removal of monopolies.

    Enjoy your bear

  55. “We should of course strive to see that the price of driving equals the cost of driving. However, taxing gas with the explicit goal of decreasing driving is wealth destroying: It penalizes the first order good of driving for the sake of the second order good of congestion.”

    Good point, but is there a tax that doesn’t destroy wealth? Unless you’re an anarchist, you’re going to have to pay for a government, and I don’t think there is a less bad way than pigouian taxes like this one.

  56. Correction, beer, lol

  57. If the actual goal was to increase ‘green’ jobs and decrease driving ‘gas guzzlers’ then the political jabberboxes would be chanting for jackhammer crews to remove roadways and plant trees where they were. Or something similar.

    The annoyance tact they take seems to be their true goal, nothing else.

  58. Good point, but is there a tax that doesn’t destroy wealth?

    Indeed, all taxes are liable to destroy wealth as a side-effect. My point was that the purported reason you gave for a gas tax was to reduce driving, thus making the destruction of wealth the goal.

    I actually concur that gas taxes, at least of the magnitude those in the US are used to them, are pretty close to the best taxes one can have. Gas taxes of the magnitude of most European countries? Not so much.

  59. My comment about AT&T had nothig to do with creation, merely removal of monopolies.

    My comment had to do with the fact that monopolies that rise and stand without government assistance do so only by serving their customers better than any potential competitor could.

    If the monopoly is not supported by the state, it is neither necessary nor desirable to remove it.

  60. at least of the magnitude those in the US are used to them

    Yup, lower taxes are better. Now, if only low gas taxes could fund the SS system alone, instead of whatever the current payroll tax (doubled for employer contribution) is.

  61. People in developing nations might adopt 105-year-old technology rather than much more expensive 5-year-old technology?

    Uh, yeah, wind power is so futuristic. Huh?

  62. People in developing nations might adopt 105-year-old technology rather than much more expensive 5-year-old technology?

    So, genius, how’s the rollout of land line telephony going in Africa? Oh, wait…

  63. sf,

    How about getting rid of SS and the tax?

    (bowing)

  64. joe,

    You flaiming Leftoid retard, I already covered that. Go have a white zin with monopoly boy Kroneborge in Havana.

  65. So, genius, how’s the rollout of land line telephony going in Africa? Oh, wait…

    Considering that 105-year-old land line telephone technology in Africa is much more expensive than 5-year-old cellular technology, it’s going poorly.

    Did you have a point that had to do with choices in energy? How many kilowatts does the grid get out of the average 105-year-old Dutch windmill anyway?

  66. MikeP,

    Are you new here? 😉

  67. Actually, monopolies can occur without government intervention for things like a company providing the best product or serivce, but most times after achieving a monopoly status a comapany will take advantage of its new pricing power to the deteriment of the consumer.

    Of course in this day and age it’s hard to find an industry that the government doesn’t have it’s hand in (often to our determinent of course) But just because the government has made mistakes in the past, doesn’t mean it should allow them to continue.

  68. K,

    I still have one each barstool waiting for you and joe at the Champps in Pentagon City. Come on down, I am paying for all property damage.

  69. most times after achieving a monopoly status a comapany will take advantage of its new pricing power to the deteriment of the consumer.

    Name one.

  70. MikeP,

    I admire your patience. Unless it is feindish delight, then I admire that instead.

  71. The badder your cop, the gooder my cop.

  72. BTW, with my MAD CONTRACT SKILLZ I am trading empty cans of beer for fresh, full cans!

    My “tab” is up to $30 and change now, but it wll work out with my empties.

    Check the link, that is how contracts work, right? LOL

  73. White zin?

    Good lord, you’re supposed to be accusing me of being an elitist, and you go for “white zin?”

    Shall I drink it straight out of the box?

  74. Considering that 105-year-old land line telephone technology in Africa is much more expensive than 5-year-old cellular technology, it’s going poorly.

    Ah, but the construction of oil-fired power plants capable of megawatts of output is going to be much more economical than distributed wind power.

    Did you have a point that had to do with choices in energy? Yes, I did. Sorry it went over your head. Maybe you should read up on the issue of energy alternatives before mouthing off like that.

    How many kilowatts does the grid get out of the average 105-year-old Dutch windmill anyway? Are you under the impression that century old windmills transplanted from the Netherlands are going to be used to supply power in Africa? What an odd thing to believe.

  75. The same geographic conditions that make wireless phones more economical for Africa than land lines also make energy sources like solar and wind, which do best when deployed through numerous small facilities providing house- or village-scale power, more economical as well.

  76. joe,

    I concur that there are a great number of advantages that distributed electricity generation using new technologies has over centralized power generation using old technologies — similar to telephony — and that those advantages may make the new technologies less expensive.

    But this thread is about gasoline and vehicles, not oil-fired power plants. Electric cars may find a home in crowded cities where one need not drive more than twenty miles, but in rural areas of developing nations, reliability and range are even more important than in developed countries.

    Indeed, exactly the factors that make centralized power generation or telephony more expensive than distributed alternatives make electric cars more unusable than internal combustion cars.

  77. Here’s an example of a company misusing monopoly powers.

    http://www.suite101.com/blog/daniel2006/intel_monopoly_abuse

  78. K,

    INTEL????

    You really need to come over here so I can crack your empty skull open. Bring joe too.

  79. How long before you bring up The Wal*Mart and their ‘monopsony’ power combined with their ‘monopoly’ power are going to destroy Vlasic pickles and Schwin all over again.

  80. hmm, I really wouldn’t consider walmart to have monopoly power IMO, usually retail is pretty competitive, although, I suppose there could be cases where a it’s not.

    anyway, I’m not planning on doing a research paper for your punk ass, lol. just a quick google.

  81. Here’s an example of a company misusing monopoly powers.

    That is an example of a company’s highly competitive behavior raising fears that it might misuse monopoly powers.

    This offers no evidence at all that they did. Indeed, by the standard you set above — everyone is worse off (except the monopoly holder of course) — this article is an astonishing example of exactly the opposite: Everyone actually referred to by this article was better off due to Intel’s actions.

  82. Actually not true. AMD was worse off short term, and if AMD was to go out of business, everyone would be worse off long term (except Intel of course)

  83. Oh, right… AMD.

    Well, here we come to the crux of antitrust law: It’s not actually used to protect the consumer, but rather to protect the competitor.

    if AMD was to go out of business, everyone would be worse off long term (except Intel of course)

    You state this as though it were fact. It’s not. Given your continuing inability to provide an actual example of a private monopoly causing actual harm to everyone, or even to anyone not a competitor, I’d think this would be clear by now.

  84. Ahh, I see your argument then is that anti-competitive tacicts like low ball pricing and dumping etc are only harmfull to the competition.

    The company isn’t taking smaller profits now so that it has a monoply later and jack them up. Ther’re just being nice, lol

  85. The company isn’t taking smaller profits now so that it has a monoply later and jack them up.

    Maybe the company is. There’s no accounting for stupid executives believing bad economics.

    But when has the net gain to consumers, from the dumping through the purported profit-taking, been negative? When has the profit-taking step worked at all?

    Still seeking that elusive example…

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