State of the Union Address
24
jan/077
jan/077
In his speech President Bush suggested a goal of cutting petrol consumption by 20% over 10 years period. It is obvious that this can be achieved by self regulation of the oil industry so we have nothing to worry about.
Now back to reality. Nice words about cutting consumption won’t achieve anything. The thing we should be focusing are incentives. There is no incentive for drivers to use less gas and Pigovian taxes are the best incentive economists can think of.
Perhaps next year the speech will start like this “The union is strong, but enough about that.. let’s talk about the Pigou Club” 
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2:31 popoldne on januar 25th, 2007
This idea could be made more palatable by making it revenue neutral. Initiate an offsetting reduction in income taxes, geared to the first – $50,000 income so that the burden for the tax is shifted form income tax to consumption tax aimed at the lower end of the income spectrum.
Now people can directly control their income taxes by actively conserving fuel.
Further bias could be place by imposing the tax only on imported oil, therefore domestic sources are sheltered formt he tax
3:42 popoldne on januar 25th, 2007
Well I think if the negative effects of gas consumption are mostly the same if you use domestic oil or imported oil.
National security is only one cost of using gas. Read the Great Manifesto by Mankiw for other costs
8:39 popoldne on januar 25th, 2007
Trying to tax only imported oil would have no effect but involve regulatory complications that would add dead weight cost to enforcement. Those dead-weight costs might be cheap enough to accept it for reasons of political compromise with the economic illiterati, but that’s about as far as I’ll go toward endorsing that.
Oil is fungible, and will flow to where the need is, no matter what we do to tax it. The consumer won’t see a choice at the pump between imported and domestic oil at different prices (who would ever choose imported at a higher price unless the domestic well was dry?). Imports will get reduced as demand gets reduced. Domestic oil in traditional wells is already cheaper than imported oil. Taxing imports might encourage development of oil shale or some such, but it would be artificial, causing us to depress that supply before a free oil market would press us to do so.
So basically, if consumers use less gasoline, we will import less oil. We import because of demand that can’t be filled domestically. Taxing imports won’t make one bit of difference from taxing all oil/gas in terms of usage.
10:28 popoldne on januar 25th, 2007
True. I guess we all agree that taxation should cover imported & domestic oil.
10:30 popoldne on januar 25th, 2007
Why not place a tax on the user side of this equation and let the proceeds of this tax be earmarked for making a more efficient model.
For example, here in LA our freeways, which are mostly free, are overcrowded. The State is responding by expanding the freeways and adding a carpool lane. But how much relief from the congestion is undetermined.
One of our shorter freeways is the Interstate 105 which has lightrail running in the middle of it. Why not make that freeway a toll road and use the proceeds to subsudize the cost of the lightrail thus lowering the ticket cost and, hopefully encouraging more ridership. It seems that is one way to lower the usage of the gasoline in a positive way.
Another way is by having a higher tax on higher fuel consumer vehicle with proceeds of the tax going to R&D for more efficient vehicles or even giving a tax break for those people buying an efficient Hybrid bringing down the price of the vehicles.
The problem with taxing gasoline is the money earned isn’t designated to solve the problem and the enduser,in this case the consumer, sees the benefits. Building more oil platforms doesn’t seem the answer is the same as widening our freeways, it does not solve the problem. Reducing our dependance in a beneficial way is the solution.
7:12 popoldne on januar 26th, 2007
A good plan to promote reducing gas consumption will be to move the taxes that subsidize gas. Move them out of the income tax, put them at the pump.
We spend billions of tax dollars to get our oil. The short list of ways we do this is arcraft carrier battle groups patrolling the Persian gulf, 2 large middle East wars, US troops guarding every pipeline in the world, subsidies to oil exporting nations, subsidies to oil equipment exporting companies, ect. These billions come out of the income tax, and other general fund taxes.
This tax spending amounts to a subsidy that prevents market forces from making alternatives economically viable. Moving the tax (NOT RAISING TAXES!) to the pump would be revenue nuetral, allow alternatives fair market compettition, stop forcing people who ride skateboards to work from paying for gas for people who use their Hummers to jog the dog, promote fuel efficient cars, and give people a way to cut their taxes by using less gas. And reduce greenhouse gasses.
4:34 popoldne on januar 28th, 2007
Points well taken. Isolating foreign source is too complex. So keep it simple and tax all consumption.
The political sale reamins difficult. This proposal is asking people to substantially increase an irritating but “necassary” part of the weekly budget. To Maintaining revenue neutrallity, and not introducing another tax source for the government will improve the viability. Especially since this tax scheme provides a way for people to control their taxes by controlling the fuel consumption.