Now that the price of gasoline has dropped (to $2.09 per gallon where I live in Massachusetts), and the American people have voted for change, our leaders in Washington should seriously consider a revenue-neutral gasoline tax.
A gas tax would play an important role in reducing the amount of carbon being emitted into the atmosphere, and it would help to reduce our dependence on foreign oil. But even more important, a gas tax would provide GM and Ford with the certainty that the demand for fuel-efficient vehicles is not going to go away. The time to move is now, while demand for fuel is low and the price at the pump is depressed.
As we all know, when the price of gasoline peaked at more than $4.00 per gallon earlier this year, everyone drove less and began to trade in their gas guzzlers for fuel-efficient automobiles. Now that the price of gasoline has dropped, the incentive to conserve could evaporate. Only by increasing the price of gasoline at the pump can our nation lay the groundwork for converting our domestic automobile manufacturing industry to the production of fuel-efficient vehicles. Ford and GM need the certainty that the demand for fuel-efficient cars will be there if they are going to re-tool their companies to compete with foreign manufacturers. Without this certainty, it would be foolish for the federal government to step in and bail out these two giants.
However, given the economic crisis we find ourselves in, this is no time to increase the tax burden on the average household. The solution is a gas tax that is revenue-neutral. To be revenue-neutral, gas tax legislation would have to include a simple and fair mechanism for returning the revenue raised back to the people. My proposal is both simple and fair.
I propose an immediate increase in the federal gas tax by $1.00 per gallon. The revenue received by the U.S. Treasury would be distributed equally to taxpayers in stimulus checks mailed out every 6 months. I estimate the amount of each check would be about $550. (This is based on U.S. gasoline consumption of 390 million gallons per day raising $71 billion dollars in new revenue every 6 months. The money would be divided equally among 130 million households, which is the number of households which received an economic stimulus check earlier this year.)
To the extent that my proposal is structured as an economic stimulus, I believe it is far superior to the recent economic stimulus package enacted by Congress. The economic stimulus checks sent out earlier this year were not funded by any new revenue; they will be charged to future generations as part of our national debt. The economic stimulus checks in my proposal are funded. In 2008 many households used their stimulus checks to pay for the increased cost of filling their tanks, thereby negating any positive effect on the economy; their dollars went to foreign oil producers rather than re-circulating here at home. My proposal would redirect dollars spent at the gas pump back into the U.S. economy.
There is a widely-held belief that we have to choose between a strong economy and a clean environment, but this is a false choice. A revenue-neutral gasoline tax would be good for the economy and the environment. It is time to take seriously the threat of global climate change and to demonstrate a national commitment to significantly reducing our carbon emissions. Such a step on our part would help to solidify international cooperation in this effort.
During his campaign, President-elect Obama showed an unusual degree of candor and political courage in addressing the ominous issues facing our country. A revenue-neutral gasoline tax would be in keeping with the kinds of smart, serious policy choices that we should expect from his administration.