Let me start by noting the Lugar does a superb job of explaining the rationale for his argument. You will read the normal points about national security and our dependence upon foreign oil. He reminds us that we spent $430 billion last year on imported oil, a figure, he notes, equal to almost half of President Obama's stimulus package. Those hundreds of billions should be spent to build a new energy economy here, not shipped to dangerous regimes overseas. Noting how Americans cut back on their use of oil when it reached $4/gallon, he goes further, writing The gains from accurately priced gasoline would grow as Americans demanded more fuel-efficient vehicles, chose non-petroleum alternatives to power them and found public transit options that work. Pricing gasoline to reflect its true cost to the nation would help spur a vast market in which oil alternatives such as advanced biofuels would become competitive and innovation would flourish.
The difference, as Lugar notes, is that a tax would be the equivalent of a permanent price increase, which would encourage manufacturers to commit to more fuel efficient cars, because they would not have to worry about consumers reverting back when the price of gasoline dropped, as it has as demand has gone down. The reduction in gasoline consumption would reduce our production of green house gases by 30%. And there would be no burden upon the American people if every cent of this tax were sent back to the American people.
Lugar favors doing an offset on the payroll tax, which of course is regressive, falling more heavily on those whose sole income is wages and at the lower levels of income. He might consider an alternative, one of sending a check directly to each American as their share of the offset (although I can see difficulties: it really should be in inverse ration to income, since those at the higher levels can easily afford the additional cost).
I do see one flaw, and that is the increased cost of motorized public transportation, and here I include school buses: when gasoline was hitting $4/gallon, many schools were finding their budgets stressed.
Perhaps his proposal needs tweaking, for reasons such as that I have just cited. Lugar understands that, writing No tax is perfect, and some special provisions may be necessary for individuals and groups disproportionately affected. But we as a nation are already suffering every day from our oil dependence, and decisive measures are needed.
So I find myself in a strange place: I think Charles Krauthammer has proposed something worth exploring. And I commend Richard Lugar for putting his good name and credibility on the line to make the idea more widely known that it would be where Krauthammer presented it, in the pages of The Weekly Standard.
We do need to rethink many things about our economy and our tax structure. We long ago accepted the idea that taxes served purposes other than merely raising revenue. We have our so-called "sin taxes" on alcohol and tobacco, not merely to raise revenue but also in some way to control consumption by making things more expensive. We have taken a similar approach on those items we classify as luxury goods on the principle that those able to afford such items can easily bear a further tax burden. This proposal has elements of both approaches. It should lead to a reduction in gasoline consumption. And properly done, it could shift some of the tax burden from those at the lower level of the socioeconomic ladder to those better able to afford the additional tax burde: after all, if you can afford a Hummer you can afford to pay more for the profligate consumption of gasoline that is a concomitant outcome of driving that vehicle.
I acknowledge I am not an economist. And for disclosure purposes, I must note that both of our cars are hybrids, a decision we made several years ago because of our concern about our own consumption. Of course the additional cost seems somewhat less burdensome when the price of gasoline soars. I do not believe my reaction to this proposal is distorted by my own personal situation. I have done enough travel overseas, including driving in Europe and in French Polynesia, to realize that for too long we have priced petroleum at a rate that has encouraged profligate consumption. One reason many countries have far superior public tranportation to that of the US is the price differential for the fuel for personal vehicles.
This is my diary for this day, posted at what for me is an unusual time, shortly after midnight. I read the Lugar, and decided to write, to make people aware of the proposal, and then to sit back and absorb whatever hits I may suffer for daring to post an idea that, at least for Lugar, originated in the mind of - gasp - Charles Krauthammer. It may not be perfect, but it represents a creative approach to addressing several issues simultaneously, reducing our consumption of foreign oil with the two accompanying problems of also reducing the transfer of wealth to countires that do not like us and reducing our production of greenhouse gases, and if done right shifting some of our tax burden from those least able to afford it to those better able. All the while encouraging a reshaping of one of major industries in a direction that ultimately will be more sustainable.
So what say you? Is Lugar wrong? Is my reaction unacceptable? What suggestions do you have to offer?
Peace. |
crossposted from 
