The politics of dumb, of pandering to the worst instincts of the least-informed voters, is nowhere clearer than in our energy policy. And especially in the way we tax it. The US is not only ruled by the oil companies, but it subsidizes them by under-taxing motor fuels. Thus we encourage profligate use of fuel while adding to the deficit.
Thus there is a really simple, obvious move that would at once make a huge dent in the long-term deficit while also helping with global warming, the balance of payments, and the environment. Why that's practically a home run, a four-bagger!
So why does nobody even talk about this out loud? Our spineless Democratic officeholders don't want to be accused of raising any taxes on anyone who makes less than $250k/year? Bad excuse. If they had a whit of sense, they'd be pushing this like crazy. It just takes a good plan.
We don't have to raise our fuel taxes to European levels -- heaven forbid! But let's look at the numbers, and how modest annual tax increases can do a lot of good.
US motor fuel consumption now runs around 170 billion gallons/year. So each penny/gallon of tax brings in $1.7B. Not chump change. What's harder to understand is that increases in the fuel tax do not necessarily translate to increases at the pump. The market price is somewhat influenced by the tax, so if the tax goes up, the pre-tax price may go down to make up for some of it. Supply and demand sets the price. Lower energy taxes thus subsidize the OPEC states.
When the concept of higher fuel taxes was raised during the two energy crises in the 1970s, the usual retort was that it was regressive; poor people would pay more because they mostly drive big old clunkers that get poor mileage. That may have been true in the 1970s, but nobody today has to commute in a low-mileage vehicle. Cash for Clunkers got rid of some of the old jalopies, and good small cars have been available for decades. They're at a premium on the used market now, but I doubt a lot of low income workers still depend on those old Dodge Polaras and Ford Galaxie 500s. People bought SUVs in the cheap-gas early part of the last decade, but that's a mistake we don't want repeated.
So let's not shock people with huge increases right away. Instead, I'd suggest that the US adopt a policy that the federal fuel tax increases by seven cents per year for at least the next 20 years. There's your warning: If you're thinking of buying that Expedition in hopes that fuel prices will fall to 2003 levels, don't count on it, but if you need to keep that Impala for another three years, the tax won't break you. It's a warning for the future, to influence buying.
To ensure that this isn't seen as just "more taxes", a silly canard at this point but a favorite Republican talking point, the money should all be spoken for. So here's a suggestion for how a "lockbox" (yeah, a gimmick) could be placed around how each year's additional fuel tax money is allocated. And yes, I know money is fungible, but this is for political cover.
Year 1: 4 cents to transportation (fix roads, bridges, create jobs, etc.), 1 cent to raise the personal exemption on the income tax (we can say it's to help low-income people afford to commute to work, and to counter any residual regressiveness of this tax), and 2 cents for deficit reduction.
Year 2: 2 more cents for transportation, 2 cents to the personal exemption, and 3 cents for deficit reduction.
Years 3-5: 2 more cents for transportation, 2 cents to the personal exemption, and 3 cents for deficit reduction.
Years 6-10: 1 more cent for transportation (usage should be declining so this is really to hold level the revenue), 2 cents for health care programs (including Medicare), and 4 cents for deficit reduction.
Years 11+: 1 more cent for transportation, 3 cents for health care, and 3 cents for deficit reduction.
As of year 10, that's 34 cents/gallon going to the general fund for "deficit reduction". If usage remains 1.7B/year, that's $51B/year, though usage will hopefully fall somewhat by then, so maybe $40B. It's a start. By year 20, it almost doubles per gallon, so maybe $70B (with reduced usage) will go to general fund (deficit).
In the short term, the transportation money will create jobs fixing things (we don't need big new highway building projects) and helping some public transit, which displaces road usage and thus does, in practice, improve traffic flow.
If the budget gets balanced by other means, there might be a clause where the deficit reduction money goes to other purposes. But the idea of earmarking the money is to make sure that people don't think it's just more boodle -- not that it really would be, but it's politically useful.
If in 20 years the gas tax is up $1.40 from where it is now (and I'd encourage states to tack on their own pennies), it would still be below today's European levels. But maybe we'd have more efficient cars.
I would not give electric vehicles a "by", though. Electricity takes energy to produce. Other energy consumption should probably be taxed more too. It might make sense to tax electric vehicles on a per pound-mile driven. That is a 1-ton subcompact would pay less than a 3-ton electric truck, but its annual odometer reading would be used to assess a fee. It might still be cheaper than gas, but we shouldn't be subsidizing dirty coal-burning power.
Will any lawmaker have the balls to take on the Fox noise machine and raise this topic?