Could rebates help sell a gas tax?

Lots of folks think implementing a gas tax would be better than CAFE to help steer consumers toward buying more fuel efficient vehicles. This, in turn, could shrink our national clown-shoe carbon footprint, reduce pollution as well as give a boost to new technologies such as electric vehicles. So why did energy secretary Stephen Chu say that the tax option is off the table (despite previously favoring the concept)? It's thought to be too difficult to get through Congress. Not only would the average American consumer be opposed but lobby groups from myriad industries would quickly mobilize against such a measure.
Perhaps a teaspoon of rebate sugar would help the medicine go down? That's what Michael Levine and Mark Roe argue in a piece published in the Financial Times:
Consider first a textbook move to get the public to accept a costly change in policy: give voters their money back through another channel. If they got a tax credit or refund for the amount of the average voter's petrol usage, they would see that they were no worse off. They could keep the money and drive less or buy a more economical car.Not a bad idea, right? They've even discussed similar ways of dealing with commercial concerns. While some people won't accept any plan with the word "tax" attached to it, perhaps just enough could be sold on the scheme if the pain was soothed with a bit of silver salve. While the authors single out energy companies as remaining contrary...wait a sec, who really cares what they think? What we care about is what you think so, let us know.
[Source: Financial Times]
Photo by rwkvisual. Licensed under Creative Commons license 2.0.
Reader Comments (Page 1 of 3)
DP 4:06PM (7/08/2009)
This is the way that it will have to get off the ground.
Tax the fuels. Give "rebates" of the average amount to each tax payer.
They can choose to drive more or less efficient cars to their own benefit or desire.
If they have an efficient car, then the Gas Tax would be a windfall for them in the end.
If they had an average car, it would be a wash, and if they had a guzzler, it would cost them more.
Their choice.
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polo 10:02PM (7/08/2009)
Or they could just give deeper incentives for more efficient cars. Then you would have the increased demand for them without a highly unpopular, economically unsound tax.
In Japan hybrids and efficient cars are top sellers because of large rebates. When SUVs started rolling out the government backed them with deep rebates. Car rebates are time-tested and GUARANTEED way to increase sales, the problem is that the programs aren't big enough (they have limits like 250K units max, or 50K per automaker) or large enough.
Double the EV credit to $16K and give ALL hybrids a $7,500K credit and not only will automakers not be able to sell them fast enough, they'll fast track production and roll out new models just to take advantage of it. This would still be significantly cheaper than rebate checks for a gas tax.
SumideXE 4:12PM (7/08/2009)
Silly ideas.
Just hike up the gas tax, dudes.
An unacceptable fraction of that gas tax money would go to administering the stupid rebate program... al just so that we feel better accepting a tax that everyone else has.
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polo 1:32PM (7/09/2009)
The gas tax is a silly idea. You're suggesting we start a tax that will spike inflation and raise prices on EVERYTHING, just so people are forced to buy a new car so they can save money on gas. Gee I wonder why the last time high gas prices made people buy cars just to save gas, was also the same time we entered severe recession. Maybe we should push gas prices higher to find out why?
Brandon 4:18PM (7/08/2009)
There's just one problem. People loathe rebates almost as much as taxes.
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meanderingthemaze 4:30PM (7/08/2009)
The average American car probably gets like 20 mpg. I would say give rebates based on a higher more objective standard like 30 mpg(so what if that's what my car gets). If you use the average, it won't motivate many people.
Also, you will have to add a clause to make sure the money goes to the PRODUCTION of electric cars. NOT development. They are already developed, but the price is too high. Huge rebates on purchasing electric cars will make it possible for automakers to return a profit.
I really think we have to focus on lead-acid EV production. So what if the energy density is low compared to lith ion, it will still take care of about 30% of the population. Plus those cars can always be upgraded with better battery packs once the technology is perfected. And rich people can afford Teslas...
All of this stalling is the same old story to prevent the electric car from taking hold.
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James 4:42PM (7/08/2009)
The rebate as described may not be the ideal implementation, but I agree that a fuel tax with a zero overall net tax increase is the way to go, along with additional tax changes that also get us closer to true-cost pricing of non-renewable resources: http://bit.ly/externalities
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GoodCheer 6:00PM (7/08/2009)
Don't those two comments pretty much directly oppose each other? Either you have
a) No net increase in tax revenue
..or..
b) An increase in tax to reflect externalities
James 6:25PM (7/08/2009)
No, they are not contradictory. An increase in fuel tax can be offset by decreases in other taxes (e.g., income), resulting in zero net tax increase. We can maintain our current level of taxes, but shift how they are applied to guide economic activity and innovation toward a sustainable direction. As fuel use decreases over time, taxes will need to be adjusted accordingly.
polo 10:49PM (7/08/2009)
Have fun with your complicated, unpopular, fiscally-risky, politically DOA tax plan.
Wouldn't it just be easier to make efficient cars significantly cheaper with credits so automakers have a reason to make and sell more and people have a reason to buy one? Nobody is going to touch a gas tax, so debating is really only a philosophical argument. But we can definitely take a look at a deeper, more extensive, more ambitious rebate program, that will make all sides very happy.
9394 4:30AM (7/10/2009)
giving a tax credit on fuel efficient cars is not identical to taxing fuel & giving rebates back to taxpayers
1. tax credit on cars induce more car buying, but not necessarily retire fuel inefficient cars. More cars also induce more car driving and more fuel consumption. Taxing fuel encourages less car driving.
2. Where does the tax credit money come from?
ufgrat 4:58PM (7/08/2009)
Because punitive taxes are a lousy idea. You want more fuel-efficient cars on the road? Make fuel-efficient cars that people don't feel like an idiot driving.
You want to cut carbon emissions? Go after the largely unregulated super cargo ships crossing the ocean.
If fifteen such ships produce as much carbon emissions as all the world's automobiles, why are you going after the cars? Far more cost effective to retrofit those 15 ships.
http://www.guardian.co.uk/environment/2009/apr/09/shipping-pollution
http://www.treehugger.com/files/2009/04/cargo-ship-emissions-more-than-760-million-cars.php
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Serge 5:38PM (7/08/2009)
Emission problems with cargo ship are not of "carbon" kind, but of more "traditional" polutants, such as sulfur dioxide, particulate matter, and nitrogen monoxide.
sac 5:52PM (7/08/2009)
ufgrat,
While I'm not disagreeing that shipping is responsible for a great deal of harmful emissions close to population centers, the real issue with regulation has less to do with the engines as it does with the fuel. These large container ships burn heavy fuel that has more in common with what we pave our roads with that what we put in the tanks of our cars. Some shipping groups (Intertanko) have proposed switching wholesale to distillate fuels which would bring the sulfur and particulate levels more on par with other forms of transportation. This has been opposed most vehemently by the groups responsible for supplying the fuel to the marketplace, such as refineries. You see the fuel that these ships are burning is the waste products from the refinement of the the fuel that you and I put in our vehicles. So the shipping industry in helping the refiners solve their waste problem. A switch to distillates largely inevitable anyway, and will be required worldwide by around 2020 within most coastal regions, but still not in the open ocean.
It's also worth noting that in terms of efficiency, these large ships are many times more efficient than even rail, and at least an order of magnitude better that air in terms of CO2/ton-mile. While I personally support a worldwide switch to distillates, it cannot happen overnight since the refinement capacity does not exist today to supply the worlds shipping fleet exclusively with distillate fuel. We also need to keep in mind that ships move something like 90% of the worlds goods and switching to cleaner fuels will at least double the cost of the fuel used on the ships which will effect the price of goods. While I think this is a worthwile price to pay, there are many that will be harder to convince since they have been addicted to cheap shipping for so long.
GenKhan2 5:13PM (7/08/2009)
Stick with CAFE. It's both effective and non-harmful to the consumer. Non-harmful to consumers being the most important part of any environmental policy. I would also like to propose an article for the site entitled: "Could Environmentalists Stop Trying to Make Everything Cost More?"
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Paul Scott 5:40PM (7/08/2009)
GenKhan2 asked: "Could Environmentalists Stop Trying to Make Everything Cost More?"
We aren't trying to make anything cost more. We're trying to get people to pay the true cost of their dirty energy. When you burn gas in an internal combustion engine, you add to the pollution that causes thousands of Americans to die prematurely every year. Millions more are sickened by this pollution, but don't die. This is a real cost and one that you pay nothing for when you buy gas.
The war in Iraq was fought because they have a lot of oil. We've spent close to a trillion dollars so far, and the cost for taking care of the wounded soldiers will drive that cost to over two trillion dollars over the next 30-50 years. When you buy gas, you pay nothing for these costs. The soldiers pay with their lives and limbs. Their families pay dearly for their lost sons and daughters, or by having to take care of a mentally or physically broken human.
These are real costs of using oil as the energy source to drive your car. Yet you pay nothing for it.
A similar argument can be made for coal, but without the war part.
This is why I favor higher taxes for dirty energy. I'm not opposed to somebody driving a Hummer. I only expect them to pay the full cost of doing so. The question for you, GenKhan2 is why you think you should pollute everyone's air and put our nation at risk of war just so you can drive an inefficient car without paying the full cost?
GenKhan2 3:14PM (7/09/2009)
I would be happy to answer your question Paul. First let's address the issue of deaths by polution. Here's some 2006 info from the CDC on deaths in america:
•Number of deaths: 2,426,264
•Death rate: 810.4 deaths per 100,000 population
Number of deaths for leading causes of death:
•Heart disease: 631,636
•Cancer: 559,888
•Stroke (cerebrovascular diseases): 137,119
•Chronic lower respiratory diseases: 124,583
•Accidents (unintentional injuries): 121,599
•Diabetes: 72,449
•Alzheimer's disease: 72,432
•Influenza and Pneumonia: 56,326
•Nephritis, nephrotic syndrome, and nephrosis (kidney failure and the like): 45,344
•Septicemia (blood poisoning): 34,234
From the data we see the top 10 causes of death result in about 77% of all deaths in America. Of the top ten, my thinking is cancer and respiratory diseases are the most likely to be connected to gaseous pollution. I'm not a medical doctor so I'm guessing here. Let's assume, for the sake of argument, all cancer and respiratory diseases are caused by pollution. It's ridiculous but it also corrects for deaths I've ruled out. In my example then, about 28% of deaths were caused by gaseous pollution. Huge right? Not exactly. There's somewhere around 300000000 people in the US. In my example then, about 0.2% of the population died as a result of gaseous pollution. Hmmm...not a big issue after all? That is, the sum total of 300000000 people creating gaseous pollution caused only 0.2% of them to die. That's a very very good ratio my friend.
Let's look at it another way. All of those dying people required medical care. I believe this is the primary "cost" you are referring to. So the only question is, do I, in some way, already pay for that medical cost? The answer is unequivocally yes. I pay for the medically insured people through my own medical insurance premiums. After all, medical insurance relies on the fact that most people don't run up huge costs. The real cost is simply distributed between the various members. The medically uninsured are paid for by the medical system or through reimbursement by the government. In the case of unreimbursed expenses, we see an increase in the cost of medical procedures to cover the gaps. This drives the cost I pay for medical care and medical insurance. In the case of reimbursed expenses, the lion share of government funds come primarily from a very small segment of the population via taxes. Being part of that group, I pay for the uninsured via very significant taxes.
To sum up: the "cost" of people dying from pollution is 1. not significant given the size of the population and 2. already being directly paid for through the medical and medical insurance systems. You are correct to note I am not paying at the pump. As demonstrated, I already pay. In fact, everyone pays. Just in a way you haven't recognized. Adding in sick people doesn't change the analysis. Everyone still pays. Therefore, I wholly reject your first argument. An increase in pay at the pump must be accompanied by a corresponding decrease in medical costs, medical insurance premiums, and taxes. Not doing so, is simply making things cost more, hence my original argument.
Now let's address the issue of the various wars. It is fair to note the Middle East has a lot of oil. It is also fair to note the Middle East tends to have increased likelihood of war. However, I am not aware of any official government documents specifically justifying or proposing military action on the basis of securing oil reserves or manipulating oil contract costs. Such documents may exist but because they are unknown I will not put words in the government’s mouth. I'm judging here on the available data rather than speculation or inference. That said, the wars are not a cost which can be associated to oil consumption.
None of that matters however. Let's forget I ever said any of that for the time being. What finances the military and the military medical system? Once again, taxes. Once again, I'm already paying. Once again, everyone is already paying. Either way, I wholly reject your second argument as 1. not attributable to oil consumption and 2. already being paid for.
So let's bring this discussion to the end. You asked, "why you think you should pollute everyone's air and put our nation at risk of war just so you can drive an inefficient car without paying the full cost?"
1. I already pay fully. In fact, I'm paying more than my share since the top 10% of earners shoulder over 70% of taxes (the real cost). If you're in the other 90%, I'm carrying you, Paul, and a whole lot of other people at the same time.
So then your question reduces to, "why you think you should pollute everyone's air and put our nation at risk of war just so you can drive an inefficient car?"
2. Like it or not, the war is not currently attributable to oil consumption based on available documents.
Here's what's left, "why you think you should pollute everyone's air just so you can drive an inefficient car?"
3. Any car legally sold in America is legal to operate. That is, no law exists to prevent freedom of choice in cars. I will always buy a car legally sold. That car will meet my tastes. It may be more or less efficient. In all cases, I am obeying the letter of the law. That is, I have been granted the legal right to pollute, as I see fit, with my car. The law may change. That's fine with me. I'll always obey the law.
There you have it.
Mike Z 5:11PM (7/08/2009)
The article does not make sense. As far as I know energy companies are generally support around the idea of a gas tax; as it removes all responsibility from their hands. I recall the CEO of Shell directly mentioning that most countries pay significantly more for gasoline due to higher taxes when asked about whether he felt the US price was too high.
Overall, however at the end of the day the cost to drive on a per mile basis will go significantly under any plan.
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polo 10:09PM (7/08/2009)
Yep. Higher prices are a guaranteed higher profit margin for the oil companies.
Throwback 5:13PM (7/08/2009)
This sounds fine, except if you drive below the average you are getting "free money" since you will be getting back more than you spent. Don't we give away enough "other peoples" money? So if I don't drive, but own a car ( i used to live in NYC and lived this way for years) I will get a tax credit for doing nothing. Doesn't seem fair to me. Also what happens if we pay out more than we take in? Our debt is already out of control do we really need to borrow more money?
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