Perennial wishes: Auto industry execs calling for higher gas tax yet again
How often do the Wall Street Journal, Bill Ford, Jr. and Thomas Friedman agree on something? When it's the gas tax, it's 100 percent of the time, and now a number of auto executives have added their voices in favor of a gas tax in order to reach the end goal of getting more fuel efficient vehicles into use.
Speaking at the Reuters Autos Summit in Detroit, people like Jerry York, a former GM board member, and Mike Jackson, chief executive of AutoNation Inc., said that setting the price of gas at at least $4 a gallon would be a better way to get Americans to use less gasoline than giving out billions in loans and grants to develop new, more efficient technologies. Only with some pain at the pump, Jackson said, will car buyers care about fuel efficiency, adding that the best way to set the price floor would be with gradual gas tax increases until the $4 or $5 price limit is reached. Tim Leuliette, chief executive of supplier Dura Automotive, suggested that $8/gallon should be the target by 2020, stressing that the increases need to be telegraphed far in advance so that automakers and buyers can prepare for them. Rebates or other assistance for low income families should also be considered, the executives said.
Of course, any politician who pushes hard for these increase will likely face tremendous opposition and criticism, but these guys are making sense. How is it that the auto industry is so far ahead on this issue?
[Source: Forbes]
Photo by functoruser. Licensed under Creative Commons license 2.0.
Reader Comments (Page 1 of 4)
Sean C 8:40PM (11/04/2009)
I'm glad to see this issue getting the press it deserves. They are obviously correct that the higher cost of gas would do wonders in pushing the development of high efficiency transportation. Most importantly it would push people to broaden their transportation choices beyond driving. And the revenue could be cycled back to R&D or mass transit, etc.
That being said, this is a dead issue. The system in the country will simply not tolerate a coordinated increase in gas prices such as they suggest, especially not at t his time when people are hurting. Plus, it would drive up the cost of other goods and services through the increased cost of transportation. This could theoretically be offset through smart policy and tax law, but it'll never happen.
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polo 10:07PM (11/04/2009)
Exactly. This is a dead issue. It doesn't even have a remote chance of being considered politically, and the potential risks to the overall economy should kill any further consideration.
If automakers want to use the government to make their efficient cars more desirable then do what every other country (especially Japan) offer: lobby for too-good-to-be-true rebates. Double the EV credit to $15K and offer $10K for hybrids and very efficient cars, and don't put a cap on how many cars per automaker can qualify. This would put the Volt at around $25K and the Nissan Leaf at under $20K....think they would sell?
Sean C 12:17AM (11/05/2009)
Polo,
larger rebates, would obviously stimulate sales, but would also reduce the incentive for carmakers to reduce the costs of their vehicles. Similar to the way feed in tarrifs for Solar PV have been handled in Germany and other places, the rebates would have to have a lifetime associated with them. I think some kind of a staged reduction that would put the automakers on notice that after xx number of years the rebates are gone and they had better have their costs reduced or sales will suffer.
This is what I actually like about a controlled increase in gas tax. It puts the CONSUMERS on alert that costs will increase $xx/yr and they had better start making better transportation choices or THEY will pay. This would obviously help to offset some of the higher cost of BEV's or EREV's and would also make more efficient cars like hybrids more appealing. As smart consumers know it's the total cost of ownership that must be considered as well as the up front Cap Ex.
Eh 12:42PM (11/05/2009)
Instead of rebates they should just treat gas guzzlers like cigarettes - tax the hell out of them and make it so people just cant afford them.
Its ridiculous to punish everyone as a whole when they could very easily just punish people who are creating the problem.
They should look at which cars get the best gas mileage and set those as the benchmark, the best cars have no gas taxes while as you get worse mileage the tax increases substantially.
samagon0 12:56PM (11/05/2009)
unfortunately, autoblog green (as much as I and other read it) is not the 'press it deserves' this needs to be shoved in every American's face through CNN, FOX, etc. one small article on autoblog isn't going to help bring the needed awareness of this awesome idea to the public so that they can see what a great idea it really is.
of course, I'm very concerned what the tax monies would be spent on, but I guess we won't know till something, anything is presented!
polo 1:18PM (11/05/2009)
"larger rebates, would obviously stimulate sales, but would also reduce the incentive for carmakers to reduce the costs of their vehicles."
The automakers would continue to reduce the costs on their vehicles and simply eat the profits. This is exactly what you want because it will give them a huge incentive increase the production volume and models of highly efficient cars - cars that would now be highly attractive and affordable to buyers. And nobody said the rebate would never end. It simply would have a time limit (of say 5 to 7 years) instead of a production limit like most of the recent green rebates. This again will encourage automakers to commit to high production volumes. That high production volume will also significantly lower the cost of these vehicles (especially EVs) over the lifetime of the rebate.
If the goal is pushing as many green cars out as possible, deep rebates will easily achieve that goal by making green cars highly affordable for buyers and highly profitable for automakers. Neither consumers nor voters would be supportive of a gas tax (either staggered or lumped) that penalized them for not buying an expensive green car fast enough. At some point you have to actually start considering how plausible and realistic your plan is - not only would it essentially hijack buyers and FORCE THEM to run out and buy a car they probably can't afford, but it would raise the price of everything else, increasing inflation, lowering consumer sales, and raising the unemployment rate (which is exactly what happened in gas price spike last year). You think this would get 60 votes in the senate? You think any politician would risk their political future by signing something that penalizing consumers for not buying (or being able to afford) a $30-$40K+ car?? Its as ridiculous as it is laughable.
polo 2:08PM (11/05/2009)
"Instead of rebates they should just treat gas guzzlers like cigarettes - tax the hell out of them and make it so people just cant afford them. Its ridiculous to punish everyone as a whole when they could very easily just punish people who are creating the problem."
I don't really feel comfortable with the government acting as a blunt-force weapon to punish people into changing consumer spending habits. Its better to encourage and motivate trends rather than force them, and the government has historically done this through subsidies. It makes sense if the goal is more green car sale and less oil comsumption, then their should be rebate and incentives for buyers to do so.
Lets put it another way. Instead of the cash4clunkers program being a rebate..what if they decided to make it a one-time tax - up to $4K - on all vehicles that got 18mpg or less, and the only way to get out of the tax was to go out and buy a new car with better mileage...... You seriously think "punishing" them would have worked out better than the rebate??
Unknown 5:03PM (11/05/2009)
Instead of rebates they should just treat gas guzzlers like cigarettes - tax the hell out of them and make it so people just cant afford them
Really ... I remember when people use to smoke ... Now no one does ... Oh wait
kidding aside Tell me where has this ever worked? ... what thing has the goverment " taxed out of existence" ? And what will prevent the car Co. from jacking up the prices to unreal levels?
omnimoeish 8:49PM (11/04/2009)
Wow, those auto execs are certainly optimistic. They want to force people to buy $40,000 vehicles like the Volt by raising gas prices to outrages sums? Do they realize that less than half a percent of people can afford a new car (if you figure 300 million Americans that buy 15 million cars a year), let a lone a $40,000 one? What about all of us poor college students who would give our left nut for an electric car but can barely afford to make rent? Unless there is a moratorium for tax hikes on gas for the poor, I can't agree with this and don't think majority of Americans can either.
How about those auto makers put actual electric cars in show rooms and get the manufacturing up and the costs down and then we can talk. Until then, the time for raising gas prices was about 10 years ago, when the SUV bubble was forming and picking up steam, now it's too late.
The government should've stepped in and supported CARB's ZEV mandate 10 years ago instead of letting hydrogen vaporware get the better of a good idea. The bottom line even the US auto makers would be screwed if gas prices were back up to $4/gallon as their main bread and butter is still trucks and to some extent SUVs, and they don't even sell many hybrids to speak of except Ford is licensing Toyota's tech.
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Brandon 8:52PM (11/04/2009)
Well said. They really have no clue what its like to live with little money. How quickly they forget that $5 / gal gas nearly killed the economy
Tohe 9:27PM (11/04/2009)
@omnimoeish
You make a good point about wealth in this country. Unfortunately we all have grown accustomed to subsidized gas prices. This is the same as living a grander life out of a credit card. Not driving a car isn't dooms day though, we could always use a little exercise and ride a bike, use public transportation and rent a car when needed.
polo 10:14PM (11/04/2009)
@Tohe, walking and biking it is not sure its a realistic option for workers living in the suburbs who drive an hour to work every morning. They'll keep driving and just not pay the mortgage bill whose interest just shot up because its one of those variable rate subprime mortgages. This is exactly what happened to California with $5 gas back in '08..and it gutted their suburbs and bankrupted the state budget that depended on the taxes from those people.
GoodCheer 9:59AM (11/05/2009)
"less than half a percent of people can afford a new car (if you figure 300 million Americans that buy 15 million cars a year)"
Um.... math much?
omnimoeish 2:30PM (11/05/2009)
5 percent buy new cars, but probably a tenth of those are over $40,000.
Tohe 9:15PM (11/04/2009)
The first mistake here is to use the word "tax". Lets instead advocate for higher tariffs on foreign oil.
The first step is to ask Governmental agencies to claim and justify their stake on foreign oil tariffs. Obviously a ceiling would be imposed, but this would help distribute profits in an adequate manner among the different involved agencies (EPA, DOD etc)
Secondly we would balance the National budget to reflect the increased funding from foreign oil tariffs and pass on these savings to the American people in the form of tax breaks.
By pursuing a coordinated, well thought out strategy, we could actually put more money in the pocket of Americans, but more importantly give them a choice as to how to spend it. So far we have ignored the true price of Gas and continue to pass the bill to our children and this has to stop.
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OpenMinded Patriot 1:25PM (11/05/2009)
Bump @ Tohe
"By pursuing a coordinated, well thought out strategy, we could actually put more money in the pocket of Americans, but more importantly give them a choice as to how to spend it. So far we have ignored the true price of Gas and continue to pass the bill to our children and this has to stop."
EVan 5:41PM (11/05/2009)
Bump X 2 on Tohe...
Awesome idea except that the United States is still a powerhouse when it comes to the refinery industry which refines imported oil and actually exports refined gasoline. If the goal is to promote the adoption of next generation vehicles there would have to be some consideration for enabling our refining industry to maintain a competitive advantage on foreign oil refiners and possibly increase its exports in the face of falling consumer demand.
polo 9:52PM (11/04/2009)
Idiots. Raising gas prices won't make efficient cars more affordable..but it will make less efficient cars (which are the bulk of most auto fleets) highly unattractive. The losses from less efficient autos (especially SUVs and CUVs) would be significantly more than any gains from the sale of the few high efficient cars they sale. Then there's the whole boomerang thing of cramping the economy when its down, leaving less money to go around and putting car buyers in a "save and wait" attitude.
You know, we could send all our nuclear waste to the sun and forever solve that problem of what to do it but the potential backfire isn't worth even the greatest possible gains.
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GoodCheer 10:19AM (11/05/2009)
They're not idiots. They want predictability of their markets. The reason the summer of 2008 hurt them so much is because the raw cost of oil makes up such a large fraction of the cost of gasoline.
If a $60 barrel of oil makes ~40 gallons, then there is $1.50 of oil in each gallon... tax is about $0.25, so processing is on the order of $0.25. The sale price of $2/gal was 75% raw materials. When the price when to $140/bbl, the raw material cost went to [$140/40=] $3.50, so the sale price went to $4/gal. Consumers faced a 100% increase in the cost of keeping their cars full, and were shocked.
Now imagine what would have happened if we had had $3.25/gal tax in place before the price spike.
@ $60/bbl: A gal contains $1.50 of raw materials, $0.25 in processing, and $3.25 in tax
gas price $5/gal
@ $140/bbl: A gal contains $3.50 in oil, $0.25 in processing, and $3.25 in tax
gas price $8/gal
Still a dramatic rise, but instead of a 100% increase in prices, consumers now face only a 60% increase in prices.
More tax means consumer prices are more stable, which means car sales are more stable, which is a better environment for business that require long term planning and complex infrastructure.
polo 12:53PM (11/05/2009)
"Now imagine what would have happened if we had had $3.25/gal tax in place before the price spike."
It would itself have instigated the oil price spike, with all the negative economic consequences. The issue would have become a major referrendum in the next election and the lawmakers who opposed it swept out of office. Your gas tax would last up until the next election, and then be thoroughly rescinded. But of course it would never even get that far because there's no such thing as a suicidal politician.
"Still a dramatic rise, but instead of a 100% increase in prices, consumers now face only a 60% increase in prices."
There isn't really a big difference in those numbers when it will have the same economic and psychological impact on the public. Why don't you sit back for a minute and think about what you just said.....nobody is going support to raising consumer prices by 60% freakin percent just to give the automakers more green car sales. Better go back to the drawing board on that one.