Higher Gas Tax Means Lower Economic Vulnerability

Proposing a higher gas tax is pretty much political suicide, and nobody wants to pay more for gas. A new study suggests that a higher gas tax could actually lower America’s vulnerability to gas price spikes.

The United States has the lowest gas taxes of any country in the developed world, and the Federal Government takes a mere pittance of 18.4 cents per gallon while most state governments take a mean average of around 26.6 cents. That isn’t a whole lot when you consider that gas prices right now are hovering around a nationwide average of $3.50 a gallon, and that the government barely takes in enough money to maintain the current highway system, never mind expand it. Hell, the Federal gas tax hasn’t been raised a single penny since 1993. So the gas tax has to go up sooner rather than later, and if it were to be raised significantly, to the rate of about $5 a gallon, it would seriously limit our vulunerability to gas spikes.

Think about it. Every time gas price goes up a quarter, it is costing an extra $5 to fill up. That is $5 that could have been spent elsewhere in our consumer-driven economy. When gas prices go up, people travel less, go on vacation less, and generally spend less money. This has a huge ripple effect across our economy, which still relies very heavily on petrol. Most Americans still don’t have access to alternative forms of transportation like public transit, and the continued growth of suburbs has meant long commutes.

By keeping the gas tax low, and thus gas prices low, we keep maintain our dependence on cars and thus oil. People have no reason to want for alternatives because hey, I’ll just keep pumping cheap gas into my tank. Then prices jump 50 cents in a few weeks like they have been recently and the entire economy takes a hit. In fact, recessions have followed every gas price run up since the 1970’s.

Starting to get the picture? Raise the gas tax so people rely less on petrol and demand alternatives like public transit and electric vehicles. Even GM's former chairman Bob Lutz thinks a higher gas tax will steer people away gas guzzlers, and the Congressional Deficit Committee thinks a 15-cent increase is the Federal gas tax is a good start. That way, the next time gas prices spike (and they will) people will be able to turn to alternatives, rather than pump their paychecks into their gas tank.

Makes sense to me, but how about you?

Source: The Economist

Chris DeMorro is a writer and gearhead who loves all things automotive, from hybrids to HEMIs. You can read about his slow descent into madness at Sublime Burnout or follow his non-nonsensical ramblings on Twitter @harshcougar.

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