With gasoline prices falling to nearly half their peak – and about $1 a gallon below this time last year – it is the right time for a bold stroke that could yield multiple benefits for the nation. Even many anti-tax conservatives believe that adding that $1 per gallon back in the form of a tax designated to build and rebuild transportation infrastructure would pay dividends far beyond the cost to consumers.
There’s another big benefit to this move; it allows the market and not Washington bureaucrats to decide the best way for automakers and other businesses to respond to higher prices. Instead of a web of unenforceable limits and directives, GM, Ford and their competitors would have good reason to develop cars that sip gas without sacrificing comfort. Alternative energy entrepreneurs would be able to look ahead with confidence that demand will not shrivel up with the next temporary drop in oil prices; ditto for cities that want to provide enhanced public transportation options for their citizens.
I’m not crazy about bailing out Detroit, but perhaps a light touch of oversight could justify giving the carmakers seed money to help get their re-engineering started.
Consumption taxes are among the most regressive, so it would be humane to give cash grants – say $500, about what the higher tax will cost someone driving 10,000 miles a year – to people of driving age below a certain income threshold. Yes, some of them might not have a car or may not drive enough to deserve the amount, but trying to fine tune this too closely will defeat the purpose, which is to lower consumption, give auto manufacturers an incentive to build higher mileage cars and to fund infrastructure improvements that will make transportation more efficient.
How could the money be spent to best effect? One relatively simple project, installing coordinated traffic signals in congested areas so that commuters don’t sit with engines idling, could yield fuel savings of 10-15 percent and reduce travel time by 5 to 20 percent, says a study by researchers at the Oak Ridge National Laboratory. The average benefit-to-cost ratios approach 40 to 1, they found. And that’s not to mention the reduction in blood pressure and road rage.
Given the wide disparity between gasoline and diesel prices, the tax should apply only to gas, sparing the commercial transportation industry – both trucks and trains – the added expense, which simply gets passed on to consumers anyway. Exempting diesel also might encourage carmakers to offer that engine option, which usually stretches a gallon farther.
Newsweek and Washington Post columnist Robert J. Samuelson is far from a bleeding heart liberal, but he endorsed something similar in advocating a moderated bailout of General Motors. Rather than a quick gas tax hike, he suggested adding a penny each month over several years. I think that’s too little and too slow, because if and when prices begin to rise again it will be too tempting to suspend future hikes. We need action now that will both get people’s attention and bring in a substantial amount of money to offset at least a little of what is being showered on failed financial institutions.
America has been insulated for decades from the real cost of fossil fuels and failing to take steps now will mean we don’t adapt to an unavoidable new energy reality. Delay will only make the eventual pain harder to bear.