From the NYTimes (Real Men Tax Gas):
According to the energy economist Phil Verleger, a $1 tax on gasoline and diesel fuel would raise about $140 billion a year. If I had that money, I’d devote 45 cents of each dollar to pay down the deficit and satisfy the debt hawks, 45 cents to pay for new health care and 10 cents to cushion the burden of such a tax on the poor and on those who need to drive long distances.
Such a tax would make our economy healthier by reducing the deficit, by stimulating the renewable energy industry, by strengthening the dollar through shrinking oil imports and by helping to shift the burden of health care away from business to government so our companies can compete better globally. Such a tax would make our population healthier by expanding health care and reducing emissions. Such a tax would make our national-security healthier ....There is something wrong when our country is willing to consider spending more lives and treasure in Afghanistan, where winning is highly uncertain, but can’t even talk about a gasoline tax, which is win, win, win, win, win — with no uncertainty at all. So, I ask yet again: Who are the real cheese-eating surrender monkeys in this picture?
I agree, except about the part where higher taxes makes our economy healthier. I'm not so sure about that but I do know that our economy does not correspond exactly with our well-being. A higher gas tax would make us better off, considering economic and other factors that make people happy.
Note: Does it take an "energy economist" to estimate $140 billion in revenues? From the EIA's Gasoline FAQs:
In 2008, the United States consumed about 137.80 billion gallons (or 3.28 billion barrels) of gasoline, about 3% less than the record high of about 142.35 billion gallons (or 3.39 billion barrels) consumed in 2007. Consumption in 1998 was about 126.52 billion gallons (or 3.01 billion barrels).
The average consumption from 2007 and 2008 is 140 billion gallons. If you multiply this by $1 you get $140 billion dollars. Yet this estimate ignores the law of demand -- as the price rises consumption will fall -- and revenues won't reach $140 billion. If they do, then the tax isn't do much of a job decreasing consumption.
For example, if the short run demand elasticity is 10% then a $1 increase in the price of gas, about a 40% percent increase in the price of $2.50 per gallon, would result in a consumption decrease of 4% (with the simplifying assumption of a perfectly elastic supply). Tax revenues would be about $134 billion. Friedman will need to cut a nickel and a penny from one of his spending categories. In the long run we'll need to cut back even more on that revenue spending! Shame.
See the comments for some more on the revenue estimates!
