AllPolitics - TIME This Week


Raise Gas Taxes Now!

The U.S. pays a huge price for still-too-cheap gasoline. Higher fuel taxes can clean the air and lower the deficit

By Matthew Miller

(TIME, May 13) -- It may be a patriotic duty to fume over the spike in gas prices, but like it or not, there's a paradox in our pique: America's love affair with cheap energy is precisely the reason that gas taxes should be higher. Bob Dole and Bill Clinton won't say so, of course. They're busy sparring over a repeal of the 4.3 cents-per-gallon gas tax the President included in his 1993 deficit-reduction plan. But pandering isn't inevitable: four years ago, Ross Perot and Paul Tsongas were calling for a new 50 cents-per-gallon tax to be phased in over a number of years. The Big Three automakers and oil giants Chevron and Conoco were onboard with the basic concept. Why? They had come around to the view held by every other advanced nation: cheap oil is costly to the environment, the economy and national security, and raising taxes to reduce consumption is a smart way to fund government.

To the rest of the world, our price complaint must look a little silly. Even at an average $1.30 per gallon, gas prices are as low today in real terms as they were in 1950-and nearly 40% lower than after the last embargo's price peak in 1981. Thanks to these bargains, Americans slurp as much oil as ever. In France, Germany and Japan, meanwhile, a gallon of gas costs more than $4. Taxes there account for 50% to 80% of the pump price. Here, by contrast, federal and state taxes together average 38 cents per gallon, less than 30% of the price. Thanks in part to their policy of high-priced gas, our industrial competitors have made stunning strides in energy efficiency and independence. In Japan the high cost of oil imports--5.5% of GDP in 1980--forced industry to restructure. By 1990 oil imports were 1% of GDP. Put another way, Japan produces about three times its 1975 output with, in effect, the same tank of gas.

It's not that the U.S. has made no progress. Economy-wide energy efficiency is up nearly 30% since 1975. Average auto-fuel efficiency for new domestic cars has risen from 15 m.p.g. to 28 m.p.g. over the same period. Still, American drivers consume about two to three times as much gasoline per capita as drivers in other advanced countries--and at a high environmental cost, as anyone riding around a smog-bound Los Angeles or Denver can easily see.

At roughly a billion dollars a penny in annual revenue, a 50 cent gas tax would slice a quarter off our budget deficit by 2000, while still leaving prices 20% below their 1981 high and less than half what motorists abroad pay. The chief (and valid) objection to higher gas taxes is that they fall most heavily on those with less income. But relief for those at the bottom--say, by cuts in payroll taxes--could be enacted as well. The truth is that every tank of gas today contains fresh proof of the "consume now" ethic that pervades our culture. In 1991 Germans enacted with little fanfare a 60 cent gas tax to help rebuild the East. In 1993 Americans found 4 cents on top of $1.20-per-gallon gas almost too much to bear, even while we bequeath our children dirtier air, the continued risk of war over oil and a trillion dollars in fresh debt every four years. Now Dole's trying to get that nickel back for us. He ought to know better.

TIME This Week



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