This proposal is intended to mitigate at least three problems facing this country in the immediate future:
- The plight of GM, Ford and Chrysler, the auto-parts industry and the millions of jobs that depend upon their health.
- The portion of our national wealth which is being transfered each year to the oil rich countries of the world
- The lack of ridership and the poor state of our mass transit alternatives for fuel efficient transportation.
A gasoline tax, at approximately European levels, is proposed to be levied on gasoline sales at the pump. It is not a normal tax; portions of the levy can be returned to the payer if used for a fuel efficient purpose or resold to someone else who wishes to use it for a fuel efficient purpose. For that reason I call it a pseudo tax.
It would also help in creating new customers for manufacturers of American cars. The basic idea is use the pseudo tax to encourage customers to trade in their SUVs for fuel efficient cars. It involves a little bit of planning and the proper timing for its implementation. It differs from the straight tax model used in the European tax on gasoline bought at the pump. That is, it adds some carrots to go along with the "stick based" European high level of taxation of gasoline.
The European tax rate on gasoline (petrol) is generally at or more than 100 percent of the before-tax value of the gasoline dispensed at the pump. That discourages inefficient use. But after buying the gasoline the customer loses the value of those taxes paid forever. Contrary to the European model the purchaser of gasoline under this plan can receive a reimbursement of the tax, in part, in full or even in excess of a full refund; it depends upon how effectively that purchaser wishes to use the reimbursement to conserve use of fuel in the future.
This new "guzzlertax" should be timed to anticipate by six months or so the ability for American manufacturers to have retooled their assembly lines toward production of a large fleet of smaller, more fuel efficient cars than exist in the present fleet. It will be charged in addition to other taxes and will almost double the purchase price of each gallon of gasoline that is dispensed at the pump. It folds in with the current plans to bail out Detroit in order to save the auto industry and the millions of jobs which depend upon it.
If put in place soon, before the worldwide economy is healthy again and the world begins paying the prices of crude oil we saw last summer, this would bring the price of gasoline back to levels we experienced last summer. But the "guzzlermoney" coupons the public will receive for the guzzlertaxes paid will have a face value equal to the value of the guzzlertaxes charged at the time of purchase. These guzzlermoney coupons, depending on how they are used, will be worth about half the value of the pseudo tax at the low end of their open market value. But for some uses they can actually be worth even more than the value of the tax which was paid. So the taxpayer can sometimes make a profit from this tax.
The customer can save guzzlermoney for future use or sell it to others: in an auction, through a broker, or in a private transaction with a friend. If used to purchase fuel efficient cars these coupons would be redeemable for at least half their face value on the showroom floor.
An American made car whose gasoline mileage is exactly equal to the CAFE standard in effect at that time of sale will be discounted at half the face value of any guzzlermoney coupons offered toward the purchase of that car. Any car whose gas mileage is less than the CAFE standard may not be discounted through the use of guzzlermoney. The dealer must show proof of sale of sufficient cars with gas mileage at or above the CAFE standard and keep appropriate sales records in order to back up any reimbursement from the Government.
Any American made car whose gas mileage exceeds the CAFE standard can be discounted by a proportional amount beyond the 50% of the face value for all coupons offered. So if the CAFE standard at the time of purchase is 25 mpg, a car rated at 50 mpg would be eligible for the full face value of the coupons offered. A car rated at 75 mpg would receive a discount equal to 200% of the face value of the coupons used for its purchase. The CAFE standard will be set as it is today, increasing each year according to a formula passed by congress. But in conjunction with a program like this proposal, auto manufacturers will tend to oppose such increases less forcefully, because the structure of this tax will tend to increase the overall market for fuel efficient cars and decrease it for gas guzzlers.
Physical guzzlermoney coupons will be printed in the style of monopoly money, but with sufficient protections to make them difficult to impossible to counterfeit. There will be guzzlermoney bills of various denominations spanning values from five (or ten) cents to 100 dollars each. Any amounts per transaction that cannot be made whole using the smallest denomination of a physical guzzlermoney bill are rounded down, the difference to be retained in the government's guzzlertaxes fund. Electronic accounts can be detailed down to the exact penny of the guzzlermoney face value for each recorded transaction.
The simplest way to manage these transactions, initially, will be to provide each customer with a receipt for the guzzlertaxes paid at the pump in the form of either a second receipt or a separately printed portion of the regular receipt. Such receipts can be exchanged for physical guzzlermoney by the cashier at that gas station at any time.
For those who do not want to bother at all with managing guzzlermoney, the customer can interact via the user interface at the pump to sell on the spot whatever guzzlermoney attains from that transaction. One will not get back the full value of the taxes paid but some lesser value determined by the current bid-ask market conditions for guzzlermoney conversions to dollars. This would usually be less than full face value but larger than half of the face value; in any case the current bid-ask prices would be quoted before any decision to sell is made final.
Eventually, if one pays by credit card at the pump, an automatic crediting of the customer's guzzlermoney account will be performed by the credit card issuer. Since this is more complicated to organize it will not be an available option at first. But it can be introduced as an option later on. The overhead costs for organizing this can be amortized over several decades, since this tax should last for at least 20 years, -- as long as it takes to wean our country from its oil based transportation alternatives.
Dealing with guzzlermoney on a regular basis will have the psychological effect of reminding drivers to conserve gasoline. One's accumulated guzzlermoney account also reminds each driver about how much gasoline has been consumed over time.
Guzzlermoney can also be used by the public at full face value (or even more) for travel on city busses, the associated parking lot fees, employer provided transportation, light rail and even intercity rail (such as AMTRAK). This should increase ridership and hopefully provide the economies of scale needed for these forms of transportation to thrive and reduce costs per passenger mile. Since Airline travel is fuel intensive it cannot be purchased with guzzlermoney.
The levying of guzzlertaxes at the pump has the beneficial effect of discouraging the public from wasteful use of gasoline, either in their driving habits on the road or in their buying habits at the dealer showroom. An alternate scheme, using money from this tax to provide only for a fixed showroom credit whenever fuel efficient cars are bought is admittedly a simpler scheme to put into practice. But it does not have all of the beneficial effects that the guzzlermoney scheme does.
For example it treats every buyer the same, depending only on the kind of car which is bought. It is independent of how much guzzlertax the buyer of that car has paid into the guzzlermoney fund. Suppose someone commutes long distances to work because of a situation beyond one's control. There will be others who will live close enough to walk to work. This scheme ameliorates some of the extra costs that the long distance commuters are forced to incur by having to pay more into the guzzlertax fund in the first place. Perhaps a compromise can be had: a combination of guzzlermoney discounts and a smaller than normal showroom credit can be implemented. There are lots of possibilities involving other uses for the proceeds of the guzzlermoney fund.
The accumulation of unused guzzlermoney will encourage some households to go to a showroom sooner than otherwise and use the guzzlermoney to purchase a fuel efficient car. This will probably be a stronger incentive than the existence of a fixed showroom credit, because that credit does not stare people in the face everytime they look at their finacial situation. Or perhaps the decision would be made to sell excess guzzlermoney on the open market from time to time. That transactioin will increase the open market supply of guzzlermoney and allow someone else to make good use of it before its normal half life of idleness actually occurs.
Alternatively, the head of household could decide to supplement an existing guzzlermoney account by purchasing more of it at the going rate, say 75% of face value, and then using the total to buy a new car which is so fuel efficient that it accepts guzzlermoney coupons at 90% of the guzzlermoney face value. Thereby, extra savings would attain to that household and extra fuel efficiency would attain to the country.
It is possible that a scheme for giving a government funded rebates toward the purchase of an American made car (and not toward the purchase of an equally fuel efficient car imported from overseas) would violate tariff agreements with other countries or be disallowed by existing WTO rules. But the indirect nature of using guzzlermoney for partial payments for the car would most likely get around that situation; it does not constitute a direct government attempt to discriminate the relative price of those cars; instead it provides an alternate kind of currency which the buyer can accumulate in several different ways, including by direct purchase in the free market, and use in any amount. Therefore, the buyer is in direct control of the final purchase price, not the government.
A portion of the total guzzlertaxes collected at the pump will normally not be returned to the public in the form of discounts for car sales. This is because some (or even most) cars will be bought using guzzlermoney at less than its full face value. That occurs when the mileage of a purchased car is above but still close to the CAFE standard.
The money which has been retained by the government can be put to use in other ways: showroom credits, funding companies engaged in fuel efficiency research, grants to local government agencies for use in developing their mass transit infrastructure and many other transportation centered projects that conserve the use of oil.