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The Short Answer Is Hike The Gasoline Tax


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THE SHORT ANSWER IS HIKE THE GASOLINE TAX

Now that Treasury Secretary Lloyd M. Bentsen has put the issue into play, we repeat our advocacy of a new federal energy tax--if it's done right. This magazine has long argued for raising the national gasoline tax substantially--by, say, 50 cents a gallon, phased in over five years in 10 annual increments. Of the various potential energy taxes being mulled over by the Clinton Administration, we still consider such a tax the best choice by far (page 28).

A gasoline tax would be a fast and simple revenue-raiser that would immediately start pumping $1 billion into federal coffers for each penny tax hike. It would be less inflationary than a broad energy tax, which would affect the entire economy, and it would not entail the delays, red tape, or costly bureaucracy of a carbon or oil-imports tax. What's more, higher prices would help conserve energy and protect the environment, to say nothing of reducing our strategically dangerous dependence on imported oil.

The main objections, of course, come from consumers, who will pay more at the pump. But U.S. drivers have long had an easy ride from the feds, and the real cost of gasoline is lower than it was in 1978. The U.S., on average, taxes gasoline at just 35 cents per gallon, with only 14 cents of that going to the federal government and the rest to states and municipalities. By contrast, Japan levies a retail tax of $1.75 a gallon, and Germany $2.37. Meanwhile, auto fuel efficiency has gone up, reducing significantly the cost of driving. And fears that a gas tax will hit some regions harder than others are largely unfounded: We reckon a 20-cent tax increase would cost those in the wide-open spaces of the West only $22 more a year, on average, than residents of the Northeast.

To avoid the inevitable consumer backlash, Clinton is considering a small tax, if any. But we urge him to act boldly. The 10-cent to 20-cent tax currently being bruited about in Washington would not be enough to promote conservation--or to put much of a dent in the yawning annual deficit of $300 billion-plus. Instead, he should sell the tax to consumers on its strengths: a quick deficit fix that will, at a stroke, discourage gasoline consumption and reap environmental benefits.


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