Old Fuel Tax Suggestion

The only problem with the gas guzzler tax is that its a one shot tax. Now if the annual registration included a gas guzzler tax, people would really think twice about that. This should replace the "value tax" that many states use.

Yes, in my proposal was an annual usage tax based on engine size and weight; in France a small 4 cyl car has an annual fee of $60, while a Range Rover V8 would incur $2000 per year usage fee.

In Holland, a Jeep Grand Cherokee with the 5.7 Hemi sell for just under $100,000 mostly because of various duties, gas & weight sales taxes. A VW Golf sells for about the same as in the US.

That would work, except for the inevitable loopholes. I'm sure there would end up being an exemption for small businesses, so everyone who owns a business (lots of people) would just buy whatever they wanted through their business. I'm also not sure a $2K annual fee would have much effect, most people would just grumble and write the check.

"That would work, except for the inevitable loopholes. I'm sure there would end up being an exemption for small businesses, so everyone who owns a business (lots of people) would just buy whatever they wanted through their business."

Why should there be an exemption? Limousine services pay the gas guzzler tax on their cars, why should it be different for truck owners?

"I'm also not sure a $2K annual fee would have much effect, most people would just grumble and write the check."

Maybe not. But it will provide a revenue stream that did not exist before, and we need more revenue at the federal level just now. If the average tax is $3000, then the Feds would collect $3 billion for every million vehicles sold. It's not a huge number in terms of the federal budget, but it's a start. And as Docknick suggested, it could be an annual fee. If annual, it would be well over $20 billion in a very few years. That exceeds the annual budget for a few small US government agencies.

I still support consumption based taxes and here's why. Your proposal penalizes everyone equally, regardless of how much fuel they actually consume. A person who buys a truck for a legitimate purpose and puts only a few miles on each day is charged the same as someone who buys the truck for aesthetic reasons and commutes 200 miles per day. Is that fair? Does it address the root issue?

People who drive with big engines already pay more in taxes because they consume more gasoline.

I see the usage taxes in other countries as simply a revenue generator from people they know can afford it. If you can afford to buy an expensive vehicle and consume more than the average amount of gasoline, then you can probably afford to pay a tax on it. Another form of opportunity based wealth redistribution.

"I still support consumption based taxes and here's why. Your proposal penalizes everyone equally, regardless of how much fuel they actually consume. A person who buys a truck for a legitimate purpose and puts only a few miles on each day is charged the same as someone who buys the truck for aesthetic reasons and commutes 200 miles per day. Is that fair? Does it address the root issue?"

That's a very good point; you wouldn't want to beat up the person who actually needs a big vehicle but only uses it when necessary, as opposed to most of my neighbors who used 5000 pound/15 mpg SUVs as daily commuter cars (one of them uses a full size H1 hummer to bring her daughter a few blocks to the elementary school every morning, it's almost funny).

One rationale for heavily taxing the purchase of new thirsty vehicles is to keep them out of the used car pool.

Most car buyers buy used cars; when I look at the weekend paper, there are far more gas guzzlers for sale than small frugal cars, based on past buying patterns. Used car buyers collectively have no choice as to what is available.

With respect to private vs business use, all expenses are tax deductible, and the total cost of doing business is passed on to the market.

We need both a purchase and an annual ownership penalty, but the gas guzzler owner who drives little will not have a large gas bill, and he will benefit from lower income taxes because of all these levies.

It's obvious why you'd see more gas guzzlers in the paper now. These things tend to go in cycles and when the cost of fuel peaks, people tend to dump the big rigs.

You're right, the cost of doing business is passed along to the consumers. So who is really hurt most by this?

Lower incomes taxes? I'm skeptical. In all my life, I have yet to see any tax go away or be reduced. They always seem to find new and exciting ways to squander our money...

"You're right, the cost of doing business is passed along to the consumers. So who is really hurt most by this?"

Consider this. High fuel use cost is passed along to the consumer. That puts the provider who chooses a less efficient way of getting his goods manufactured or transported to market at a disadvantage to the one who chooses more wisely. It also means the consumer who chooses a product that is more fuel intensive in production and distribution will pay more and be encouraged to choose other products.

As consumers it is difficult to even determine what products cost more in terms of fuel usage and pollution. Selective taxes that are passed on to the consumer is one why of getting the consumer involved.

It doesn't penalize everyone equally, it penalizes people for the decisions they make. If they buy a car that gets better mileage, they won't pay as much in annual taxes.

I have a neighbor who uses their SUV to drive the kids to the end of the driveway (300') and idles it to keep them warm while waiting for the school bus.

"If they buy a car that gets better mileage"

The point was that many people have a legitimate use for such a vehicle and there is no alternative choice (e.g. farmers). You're punishing them along with the poseurs. There are many examples of small businesses that rely on work vehicles and the economy is at a point where many cannot afford such a proposal. Everybody can cite examples of the decked out 4x4 behemouth that never sees anything but the school and mall parking lots. I just don't believe this is the answer to that issue. Too many valid exceptions for such a broad brush.

"There are many examples of small businesses that rely on work vehicles and the economy is at a point where many cannot afford such a proposal."

The cost will be passed on to the consumer who will make the choice if they want the product. The choice will be made by the marketplace not by some government official who might decide we still need buggy whips because the buggy whip manufacturers and unions want to continue making buggy whips.

Yes, the cost of fuel and pollution will cause some changes, that is the idea.

"The point was that many people have a legitimate use for such a vehicle and there is no alternative choice (e.g. farmers)."

And will not the farmer's pass the cost on to the consumer? Then will not the consumer then be able to make the choice to a less fuel intensive food?

Trying to maintain the status quo in a dynamic market and a changing world, will only lead to failure.

Why do you folks who obviously are not commuters always want to tax the problem away? It simply does not work. Gasoloine prices are already laden with taxes. And even with gas at over $3.00/gallon people are still buying SUVs for their trips to the grocery stores.

Such taxes cause those who can least afford it the most pain. Let the free market work for a change. This is not worth doing...it's a terrible idea.

I'm curious, JT, since you're so intent on taxing us to death, what do you drive for vehicles? How far from your home do you work?

I don't know about JT, but I drive about 40K miles per year and spend about $6K on fuel. Regardless of our individual situations, something does need to be done to drive up prices significantly. The "free market" does not seem to be working in this case because the current cheap fuel and high consumption are having widespread political and economic impact. It is not reasonable to expect individual consumers to change their behaviors in response to these "big" issues (I'm unlikely to do anything different unless the cost of fuel at least doubles).

Thanks for responding Craig.

I'd disagree that the fuel prices are cheap. If the price alone is compared to prices in other countries such as the UK the price seems cheap, but if the cost of gas as a component of the cost of living are compared, the burden is not disproportionate in the UK. Many of the things UK citizens take for granted such as higher education, health care, and housing, that are paid for or subsidized by the government, we have to pay for ourselves.

Yes, they pay a much larger portion of their income to the "crown", but their basic needs are taken care of. The proposal people keep bandying about is to add to our tax burden to artificially control demand without those added taxes alleviating any of our burdens. Comparing the cost of gas here to the cost of gas elsewhere without taking the overall economic structure into account is, IMHO, unrealistic. That would have widespread economic and political impact, and I think it would be adverse. D.O.L. statistics as well as the stock market would indicate that we're currently on the brink of a recession. Artificially raising gas prices with an added tax is, I think, a poor idea.

To the working folks: if you want to drive up prices across the board, accelerate inflation, and increase unemployment and interest rates, then support added gas taxes. Every single good and service needs to be transported. And the cost will be either passed on directly to you or offset with layoffs...in many cases both.

I do understand the economic impact, but the fact remains that the U.S. is consuming about twice as much oil as it is producing, and that is not a sustainable condition. It appears to me that oil consumption will inevitably be reduced either through government action (taxes or mandates) or through market forces driving the price up (primarily due to consumers in other parts of the world). This condition will not exist in 50 years.

At this point U.S. policy makes still have a choice, they can take action to reduce consumption in some kind of orderly fashion (taxes, import duties, serious mileage limits on vehicles, annual fees, etc.) or they can do nothing and wait for prices to significantly increase on there own (probably in big, unpredictable jumps). I do understand that they will probably continue to do (almost) nothing and our kids will have to deal with the economic consequences. The bottom line is; do you want to live with a controlled economic slowdown now or do you want to deal with a bigger impact in the future. Pay me now; pay me later.

Whether or not U.S. fuel is "cheap" in absolute terms (or compared to the rest of the world) is not really relevant to the policy question. The only things that matters is the fact that we use too much and/or produce too little. Realistically, I do not see U.S. production increasing enough to make a real difference, at least not at $100 prices.

Europe does have some advantage with their heavily taxed fuel, if/when the "stuff" really hits the fan and actual fuel prices increase, they will have the option of adjusting the taxes to control the rate of increase. The U.S. consumers will take the full hit, then we really will have to worry about recession, inflation, unemployment, etc.

I do not think that leaving this problem for the next generation is responsible.

"but the fact remains that the U.S. is consuming about twice as much oil as it is producing, and that is not a sustainable condition"

This F$%^ BBS trashed my response again and I forgot to save a copy before submitting! Oh well, here goes again...

Of course, you're right. The oil will eventually run out. However, having lived through the 70s I have a distrust of the reported doom and gloom scenarios regarding exactly how much oil is actually left. That was nearly 40 years ago now and we're still chugging along.

Besides, do you really think that if the US reduced consumption by 1/2 that any of the remaining consumers would do likewise? It might even have the opposite effect in that global supply prices would go down and encourage those rapidly expanding markets to grow even faster. The laws of unintended consequences can be a real b!tch.

I support reduction for one reason only, to reduce the cash flow to potentially unfriendly states or states that support those that would do us harm.

I believe we should use this time to fund research and I mean full bore research into alternatives. Trying to hold back the tide by reducing consumption globally is impossible, lulls people into to a false sense of security so they don;t take real action and ultimately will fail IMO.

I think you are making my point, I'm not talking about "running out of oil," although that may be a legitimate concern. I'm talking about the fact that the U.S. is taking a huge economic hit by having to import that much energy every year. It is not an economically sustainable condition and it puts the U.S. at the mercy of a international energy market that they cannot control. Ultimately, the U.S. cannot control the value of their own currency. That is dangerous, much more dangerous than giving money to some hypothetical unfriendly state. This is primarily an economic problem, not an energy problem. We simply cannot afford to do nothing for a few more decades while we think about the issue.

I agree that the U.S. (and the rest of the world) should be researching alternatives, and we have been talking about it for about 40 years now. There are two major problems; we are not seriously funding energy research, and any credible alternative energy will not be cost competitive with our current cheap energy sources. The same price increase that will be required to reduce consumption will provide an economic incentive for non-governmental alternate energy research. There is no "magic bullet," the next major energy source will not be cheaper than $100 oil, it will be more complex and more expensive, we currently use oil because it is cheap and easy. Whatever the next major energy source is, it will be expensive, controversial, and slow to implement; I do not expect to see a serious alternative to oil in my lifetime. This research is needed and it will benefit future generations, but we still have to deal with the current issues.

"The oil will eventually run out. However, having lived through the 70s I have a distrust of the reported doom and gloom scenarios regarding exactly how much oil is actually left. That was nearly 40 years ago now and we're still chugging along."

Possibly the experts were misquoted and people only remember the headlines (e.g., Running Out of Oil). We are running out of known reserves, and that is all that can be legitimately stated. There are undiscovered reserves to be sure, but no one can tell us how much there is or how difficult (both technically and politically) and costly it will be to recover.