By on January 14, 2009

If you don’t think the automotive world is shifting beneath our feet, think again. USA Today reports on a growing trend: car makers and dealers pushing for higher fuel taxes, of all things. The auto industry’s newfound love of eco-friendly policy comes down its need to satisfy increasingly stringent federal fuel economy regulations. If gas prices stay low, the government-pleasing vehicles will continue to languish on the lots and docks, Prius-like. Small car profit margins will disappear, Prius-like. AutoNation CEO Mike Jackson was ahead of this particular curve ball when he called high gas prices a good thing. MJ is now joining the New York Times editorial board (amongst others) calling for increased federal taxes to git ‘er done. (After all, European motorists pay their governments through their nasal passages for the privilege of fueling their vehicles.) One of Uncle Sam’s new BFFs agrees. “GM CEO Rick Wagoner said taxing gas or providing rebates on fuel-efficient cars ‘is going to be the most effective way to move the needle fast.'” While Jackson and Wagoner are of one mind on raising gas taxes (or something), the AutoNation jefe is no fan of all this wild needle swinging stuff. “We watched the consumer stampede to fuel efficiency in May, and now the herd is getting ready to stampede back to their old ways,” says Jackson.

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62 Comments on “Automakers Join Call for Higher Federal Gas Tax...”


  • avatar
    ca36gtp

    Hmm…government increases mandated fuel standards, carmakers then need to push for higher fuel tax to sell smaller vehicles the government is forcing them to build, the government gets more tax revenue.

    …anyone else smell a shakedown?

  • avatar
    tedward

    it stinks, the only other way I can think of to push people to small cars would be to formalize vehicle classes and set footprint and weight limits, but I don’t like that either. Tax incentives for small rides won’t really work, and would probably have to be dropped if enough people to make a difference actually qualified for them.

  • avatar

    It’s been clear for decades that a fuel tax is the only way to increase fuel economy. Higher fuel standards are just a way to pretend you’re increasing fuel economy without upsetting voters.

  • avatar
    Casual Observer

    I love when “progressives” advocate regressive taxes.

    Good observation from ca36gtp. We’re stumbling upon a long-hidden secret the more we learn. Big business loves big government and big government loves big business.

    The taxes and regulations of big government eliminates startup competition from ever threatening big established businesses; while big government needs big business around to keep organized labor afloat. They need each other and will always have each other’s backs.

  • avatar

    Casual Observer,

    “Progressives” love regressive taxes because they know half the population in this world can’t spell it, much less understand what it means or how it costs them more money than it does the rich.

    Suggest raising income taxes for all those making over US$225K a year and see how quickly the government and big business shuts up.

  • avatar
    psarhjinian

    It’s impressive to watch the utter cowardice of each pillar of society:
    * Government doesn’t want to offend the electorate, so anything that is mildly unpalatable is off the table
    * The electorate is all for regulation or taxation, provided it’s someone else’s tab.
    * Business doesn’t want to be regulated in any way, so they’ll download the blame to consumers, and the back-stop requirement to government.

    Cowards, the lot. Government needs to make the hard decisions that need to be made, business needs to accept regulation and responsibility for the freedom (to earn money) it enjoys, and the general populace needs to grow a pair when it comes to short-term pain. Like it or not, a functioning society is a cooperative thing, and it’s necessary to subjugate one’s own selfish desires on occasion.

    A gas tax is a good idea, regardless of your tendency towards progressivism. Other than sunlight and opinions, there are few unlimited resources available, and it’s in our best interest to develop infrastructure for managing them effectively and/or developing alternatives, because charging head-on into the brick wall of resource contention.

  • avatar
    reclusive_in_nature

    I actually get to meet my senator tomorrow. (Took a lot of phone calls and letters, but I got it.) I’m going to make sure I drive the point home that if he and his peers even think about this “social engineering” bullshit he can expect employment elsewhere because he sure as hell won’t by my senator. You want people in smaller, more efficient vehicles? Provide an incentive. Anything else is just totalitarian, and the rest of America won’t put up with it.

  • avatar
    RobertSD

    Actually, if you go back even further to when CAFE legislation started moving through the congress, Mulally mentioned that a gas tax would be a great way to stablize prices, generate revenue and shift consumers towards more efficient vehicles without the need for the government to demand a gas mileage floor (which creates economic loss). It was quite a controversy. And it was only August 2007 – nearly a year before gas prices peaked.

    A much larger gas tax is an excellent idea, by the way. I’ve been saying that even longer than Mulally.

  • avatar
    Stephan Wilkinson

    A gas tax is such an obvious good idea, if only because it flushes the Neanderthal libertarians.

  • avatar
    HeBeGB

    It’s not just trying to develop/hit CAFE-type standards…not that there’s anything wrong with that. It’s this ridiculous roller coaster ride with oil prices. Everyone from manufacturers to drivers is at the mercy of something they have almost no control over…and it’s a lot easier for drivers to be flexible than manufacturers of products requiring long development times.

    Once the stigma/fear of increasing taxes on gas has been breeched, I wouldn’t be surprised to see any and all municipalities lining up to make gasoline the new nicotine. Eventually, it will be considered a vice and can be taxed into extinction.

    And is that really a bad thing? After all, I’m not a gas-fan, I’m a car-fan. Aside from the romantic notions of “the smell of octane”, I really don’t care much what’s in the tank/battery. It’s about freedom of movement and the visceral thrills associated with it. If we can get to the point where we don’t need gasoline, we’re not at the mercy of some ambitious dictator in a far-away land, and maybe even the environment is a bit better…I can live with that.
    gb

  • avatar
    mikeolan

    For those who advocate this: how about you all pay higher gas taxes.

    We’ve gone through an insane period of pump gouging over this summer under this farce of resource contention and demand, and everyone faced near $4.00/gal gas at a point which every consumer gave econoboxes a good hard look. We probably will repeat the same cycle this summer too… and next…

    You know what? If people still prefer to buy the biggest most fuel gulping vehicle they can afford, then that’s what they prefer. So in addition to paying the market price for gasoline, you now advocate taking more of their money and giving it to the government?

    Does anyone advocating this actually work, raise kids, or budget their own finances or just suck off of their parent’s trust fund / inheritance?

  • avatar
    Phred_da_Phrog

    mikeolan,
    I work (at $11 an hour, 40 hours a week), pay taxes and my college loans, and I think a higher gas tax would be a good thing. Maybe it could help stabilize the price, as well as help fund the huge amounts we’re about to spend on infrastructure with this new stimulus package. I’d rather pay $4 a gallon and have $1 of it go to the feds to maintain the POS roads in upstate New York than $4 a gallon and have that dollar go to the Saudis and Yemenese for their artificial islands in the Persian Gulf.

    Maybe it also will increase use of mass transit, brining more jobs to my town with a railcar construction plant, which in turn would help the rest of the town.

    Remember, our taxes are nothing. We complain about $3 gas, while Europeans pay $9 a gallon and $25,000 for a Ford Focus (and make less money on average)

  • avatar
    garllo

    “Give” the automakers $billions in bailouts then talk about raising the gas tax? HMMMMMMMM maybe we will end up paying for their mistakes more than once! Sounds much too coincidental to me. People talk about the gas tax in Europe but that is apples and oranges. They actually spend that tax money on the people in the form of health care subsidies etc. I’m not saying that it’s better or worse-just different. I think that any time taxes are raised or imposed here that the money is squandered-I mean spent on so many other things rather than where it was intended .

  • avatar
    TEXN3

    You’re correct, fuel prices will rise when supply starts to rise again. Normally when fuel prices were at the level they’re currently at, the price per barrel was about a 1/4 the current level.

    A higher fuel tax only affects those that aren’t conscience when they make major financial decisions like buying a vehicle. Let’s raise it and watch people make some more intelligent decisions. Hell, I’ll put my money where my mouth is and commute via bike in the winter (currently do from Apr to Oct). I’d just like to see less waste from everyone…what is wrong with that?

    Of course, that doesn’t even get into the issue that more money is needed for these (bureaucratic) DOT agencies…less fuel tends to mean more miles traveled > more wear and tear on the highways and a desire to build and widen roads. we don’t need rail transit in many mid-western and western cities, that infrastructure is expensive and limited…buses are cheaper and do the same job as a train. Materials have increased in price, labor has increased in price, and we can’t continue to live off of 50-70 year old infrastructures either.

    Again being wise with our tax dollars being spent will get us alot further in this nation. And less of this “me, me, me” BS, especially when I have to share the air, road, and water with everyone else. Those that can afford to drive something larger, more luxurious, etc… will continue to do so and an extra dime or quarter won’t affect their daily/weekly/monthly/yearly budget. Probably won’t affect mine either.

    Yes, I work and raise a child…while driving a newer Mazda3 wagon and an old Volvo 760. Paid cash. Own a home too. Firmly middle-class and under 30. I even vote Republican!

    Finally, I’m all for infrastructure work…it’s in my line of business (power generation, energy corridors, transportation, facilities, construction).

  • avatar
    50merc

    psarhjinian: “Cowards, the lot. Government needs to make the hard decisions … business needs to accept regulation … and the general populace needs to grow a pair when it comes to short-term pain.”

    That’s right. We went off the track in 1776. Government should forget all that “consent of the people” nonsense, businesses should realize the bureaucracy is their best friend, and ordinary citizens should allow their betters to run things as they please. I say, let the beatings continue until morale improves. Persuading voters what is in the country’s best long-range interests is so tiresome.

  • avatar
    Stephan Wilkinson

    “If people still prefer to buy the biggest most fuel gulping vehicle they can afford, then that’s what they prefer. So in addition to paying the market price for gasoline, you now advocate taking more of their money and giving it to the government?”

    Absolutely.

  • avatar
    toadroller

    50merc, amen.

    I just want to cry.

  • avatar
    vww12

    «I’d rather pay $4 a gallon and have $1 of it go to the feds to maintain the POS roads in upstate New York»

    If the roads are POS in upstate NY, it is because your current gasoline taxes are being “flexed” to other projects (i.e., diverted to political favortites rather than roads.

    Per US DOT data, from 1992 to 2006, 38% of the 18¢ gas tax was flexed away from roads and bridges and into other political playthings such as “mass transit”, etc.

    Therefore, before anyone advocates for higher taxes on account of existing potholes, ask whether your current taxes are being spent well.

  • avatar
    bluecon

    Maybe the government should cut spending.

    What a crazy radical idea.

  • avatar
    findude

    I like driving. I really like driving nice cars–especially powerful ones that handle well. But it is also intuitively obvious that today it makes more sense to drive more fuel-efficient cars and, perhaps more importantly, to do whatever possible to drive less.

    There will always be demand for high-performance cars. We may see the notion of performance shifting away from acceleration and high top speed and biasing more toward handling and agility. I know that’s how my preferences have shifted as I have, er, matured.

    An important take-away lesson from the Detroit manufacturers meltdown is that inability to predict the future market means that, well, you can’t predict it. Imposing federal fuel taxes to clearly define the way forward is doing everyone a favor.

    Price volatility helps neither consumers nor manufacturers. The government can play a valuable role by regulating the fuel tax. Perhaps it’s worth considering an approach where the tax amount/percentage flexes within a band in order to regulate consumer price as much as possible.

    Another interesting alternative would be simply to tax each barrel of oil that enters a refinery and spread the pain among all energy users.

  • avatar
    Casual Observer

    Phred and others:

    The inherent problem in raising the federal gas tax is that the money goes to the federal government. Why should the federal government be involved in the funding, planning, or taxation of a road built in Wichita, Kansas for the purpose of use by Wichita residents?

    Public money is best used when it stays close to home. If Wichita needs a road, it should be up to Wichita to build it. If they can’t then they should appeal the the State of Kansas for some help.

    The federal government should not be involved for a myriad of reasons:

    A) Those politicians with the greatest pull in Washington will have their state’s road projects made the priority, regardless of merit.

    B) There is no accountability to the people of Wichita because they do not vote for the rep’s of the other 49 states. They vote for 3 members of the 535-member Congress.

    C) They have a poor track record of managing money and projects.

    D) The Constitution does not provide the federal government with that power.

  • avatar
    toadroller

    Findude: “But it is also intuitively obvious that today it makes more sense to drive more fuel-efficient cars and, perhaps more importantly, to do whatever possible to drive less. ”

    Maybe I’m not that intuitive…

    But my math is this: Let’s say I drive, between my two cars, 20k miles a year. (it’s actually a little less, but let’s keep the math simple and intuitive.) And averaging 20 mpg means I use 1000 gallons of gas a year.

    At $2.00 a gallon, that’s $2,000 a year and at $4.00, it’s $4,000.

    If I were to buy a fuel efficient set of cars that go 30, heck 40 mpg, my fule costs would go down to $1,000 to $2,000, depending on the price of gas, saving me 1-2k per year, in the best of all worlds, driving the teensiest of cars and unable to take my whole family (five kids) with me.

    To save that money, I’d have to buy two new cars at about 20K each, and then pay sales taxes and registration on them of well in excess of $2000, my fuel savings year one. ROI, though, would come in about 10 years.

    I love my Audi A8. 300hp, quattro in Maine, 20mpg when I beat on it around town, 26-28 on the highway. Paid for.

    I love my Chevy Venture. Seating for 8 (yes, number six is on the way), 24 mpg, paid for.

    Imposing a strong tax is absolutely NOT the way to secure (secure what? Precedential taxes and price fixing? ) the future, unless by the future you mean that we get used to paying further astronomical taxes on items, clearing the way for more taxes, flexing those taxes away to more government programs that do no good, ad nauseum.

    Price volatility does not hurt consumers when it goes down. Changing one’s budgeting or fiscal responsibility is not that painful.

    Securing high prices is an excellent idea. Ask all those who locked in their fuel oil prices this past july at the peak of $4.70 a gallon. I just filled my tank for $2.08 a gallon, and the money I saved fearing the worst is now being put to use elsewhere.

    Why people are upset at the price of fuel coming down so dramatically is beyond me. Speculation drove it up, saharply, and busrt. Now it comes down. Booyah. I wish I had a 5000 gallon tank and the ability to make the gas last longer. Buy in volume and keep it that way.

  • avatar
    threeer

    Just because many of us believe we CAN afford to drive big, honking, gulping gas hogs…should we, really? Are we that short-sighted when it comes to resource use that we could give three figs about what the future holds? I’m not a bleeding heart tree-hugger, but the attitude of “if we can afford it, why not?” tends to grate me just a wee bit. I love big, powerful cars as much as the next person on this site, but in truth, my daily driving habits don’t call for it. If adding a gas tax helps drive us to be a bit more economically minded, then so be it. Incentives don’t work (witness the massive incentives that the Big 2.8 place on the hoods of their cars, yet they still can’t sell enough to save themselves).

  • avatar
    findude

    toadroller,

    Excellent points. Some part of the sense making has to be related to where you are in the life cycle of your current fleet. If you do not purchase a vehicle soon, then your argument makes a lot of sense. The next time you do need/want to buy a car, the cost of fuel will influence your decision (regardless of whether you think that price is high or low).

    Governments impose taxes and offer tax credits not just for revenue but also to influence the behaviors of citizens (I know, I know, but that’s the way it is). The private sector does this too. Our orthodontist offers a progressively bigger discount for each kid in a family who gets braces. Many (private) schools do the same. The government offers parents a child tax credit–it may or may not affect whether people become parents but does reduce their income taxes if they do. No tax is completely fair and some are surprisingly unfair to some populations.

    Another important point is that people don’t just buy the cars they want; they can only buy cars that are available. Anybody who bought a new car from 1990 to 2005 had a high probability of buying an SUV because that was what was available. It’s also the same reason Mercedes buyers overwhelmingly “chose” silver over any other color–most of the Mercedes on the dealer lots were silver.

    If a fuel tax will shift the percentage of cars on dealer lots in favor of fuel-efficient vehicles, then people will buy them because that’s what’s available. People who really value large vehicles will still be able to buy them.

  • avatar
    srh

    I’m all for raising the gas tax.

    I drive gas hogs, because there’s no reason not to. The only thing that will encourage me to use less gas, is increasing the cost of gas.

    That’s true for the rest of the US as well. Despite hundreds of billions of dollars dumped down the mass-transit drain over the decades, the only impact to fuel usage came from the $4/gallon gas of last year.

    I don’t like taxes, but if one accepts that less oil usage is a good thing, then the only way to get there is with a gas tax.

    Here’s a great suggestion:
    http://www.weeklystandard.com/Content/Public/Articles/000/000/015/949rsrgi.asp?ZoomFont=YES

    Basically increase the gas tax and decrease the payroll tax. Revenue neutral, slightly progressive. And it has the nice effect of taxing things that we want to discourage (fuel usage) and decreasing taxes on things we want to encourage (productivity).

  • avatar
    no_slushbox

    There is another very good reason for gas taxes, and it is to keep roads publicly owned.

    You want to be told what exactly you can drive, where you can drive it, and be electronically tracked the whole way? Then you must support privatized roads.

    Private corporations competing against each other to make things works very well.

    However, for structures that can only be provided by one source, like roads, I would much rather be taxed by the government than systematically screwed out of everything I have by a private corporation.

  • avatar
    badsparky

    AMEN Toadroller

    This makes my blood boil – this is just the beginning. Better get yourself a gun now. They are going to raise the taxes on those too. They make up this global warming stuff and I’m sitting here in Ohio with 4 degrees outside freezing my rear off, the polar ice caps are growing to 1979 levels and I’m suppose to worry about global warming?!?! I can’t drive a little car because they don’t go in 2ft of snow – we have a name for those little cars in Ohio – death traps. And now the automakers want the gas tax to go up so we all run out and buy different cars because we can’t afford to drive the perfectly good ones we own now. Get new loans on those little cars, go into more debt, pay more taxes because we bought something…. this has to be the stupidest thing I have heard and I hope this isn’t true – but Washington just gave 2 of the 3 bailouts so they will sing whatever they have to so the money keeps flowing.

  • avatar
    toadroller

    Incentives?

    Taxes would work as incentives?

    Incentives and discounts don’t work as incentives, but raising the cost of fuel for all would?

    The last thing raising the price of gas is going to do is incent me to buy a new car. I like the comedian Gallagher’s concept of incentives for dealing with road rage. Forget airbags, put a ten inch spike in the middle of the steering wheel. Problem solved.

    Detroit’s problem has been building the product people want, and using genuine marketing principles (not “buy me I’m cheaper than that better stuff from far away” or “buy ‘murican, it’s your patriotic duty”, but establishing reputation built on quality and value) to re-establish, well, quality and value. Detroit owns the large vehicle and truck market, though Japan has chipped steadily away through the years. Detroit makes good people movers, and many families need these. But main stream sedans, small cars, sporty sedans, luxury cars, etc. have all been lost markets.

    Who but Detroit would put the worst examples of their products into the rental fleets? It’s an opportunity- an extended test drive, and they do things like the Malibu Classic or Pontiac Vibe or the Mustang. Awful vehicle. When I travel on business, I’m alway’s curious and interested in the foreign car I get. And always disappointed in the American cars I get.

  • avatar
    Casual Observer

    findude – I think you have it a little backwards. Dealer lots were full of SUV’s because that’s what people demanded – not the other way around. Same with the silver Mercedes.

    There’s a direct correlation between the cost of energy and economic growth. The more resources cost, the less we produce.

    With the increased cost of gasoline comes the unintended consequence (there’s that pesky term conservatives love) of alternative fuels and modes of transport. The demand for diesel, electricity, rail transport, etc., goes up; and we know what that means – the price of producing and transporting just about everything goes up. Boom! Inflation.

  • avatar

    If you want proof that higher fuel taxes work in promoting better fuel economy, look only to Canada. Our fuel is significantly more expensive than American fuel. Culturally we’re not all that different, at least in this regard (we love our automobiles about as much as Americans do).

    Consistently, when the #1-selling car in the US is a Camry or Accord, it’s a Corolla or Civic here. Canadians drive smaller cars on average than Americans.

    Sure, we have a lot of pickups and SUVs on the road, too, but I would wager we don’t have as many as there are in the US.

    One other thing: if you argue that lower fuel prices provide greater freedom, consider this: all burned fossil fuels emit pollutants into the atmosphere. Larger vehicles take up more space on the roads, reducing traffic capacity. Large SUVs and pickups pose more danger to occupants of small vehicles than smaller vehicles do. Economists call these things externalities, and they’re real. Higher fuel taxes help to internalize them and to provide a higher likelihood that consumers’ choices will properly value not only the benefit to the individual consumer, but the cost to society in providing that benefit.

    We aren’t representative of the typical auto buyer here. We know what we want for the most part. We know what a given engine can do for us for performance. For every gearhead who buys a V6 Accord because he likes the extra acceleration, I bet nine buy one because they have this illusion about the inadequacy of the four-cylinder engine. I have a client who bought a V6 because, in her words, “we all know that a four-cylinder is no good on the highway”. She made that choice despite fuel costing more here, but if only a few made a different choice because of a 20 or 30 percent difference, that’s progress.

    If the revenue is the issue, make sure government puts it into roadworks.

  • avatar
    psarhjinian

    For those who advocate this: how about you all pay higher gas taxes.

    Most of the world already does this. The average Canadian, for example, pays much more than the average American, despite Canada’s status as a net exporter of oil. We’re also using less fuel (for transportation purposes), and buying more fuel-efficient cars. The increase in the price of fuel this past summer hurt, but not nearly as badly as it hurt Americans.

    You know what? If people still prefer to buy the biggest most fuel gulping vehicle they can afford, then that’s what they prefer. So in addition to paying the market price for gasoline, you now advocate taking more of their money and giving it to the government?

    Yup, and here’s why. The use of fuel has a cost to society. It may be a deferred or less-than-immediate cost, but it’s a cost nonetheless. Just because you don’t see that cost doesn’t mean it doesn’t exist. It does, you’re just paying for it in other ways (wars for oil, the economic fallout of the fuel price increase, environmental damage, etc). Taxes are a demand-side method for reducing consumption, instead of an (less than stellar) supply-side constraint like CAFE.

    Yes, it puts money into the hands of the government. Guess what? The American people, in voting for a lot of less-than-wise people the past eight years and implicitly supporting their expensive policies, now have to pay for it. Gas taxes are one really useful way to do this; a flat VAT or sales tax would be another. That debt has to be paid somehow, and the usual suspects (cutting funding to people we don’t like) isn’t a valid option as there’s only so far you can cut social programs (or defense, security, and such) before you start paying for those cuts in more unpleasant, if less direct, ways.

    Yes, it also prevents people from buying big, heavy, fuel-wasting vehicles. Guess what? The free ride is over, America. Time to start acting like a model global citizen.

  • avatar
    Geotpf

    badsparky :
    January 14th, 2009 at 4:07 pm

    They make up this global warming stuff

    Using your logic, they make up gravity, too. Global warming is as real as gravity. Keep in mind it’s a long term change (decades) of just a few degrees (worldwide average), with some places getting cooler (but most getting warmer). But that minor, long term change will cause massive problems everywhere on the planet.

    Now, one can make the argument that higher gas taxes or limiting carbon emissions won’t fix the problem. In fact, I would make those arguments personally (I personally believe the only solution is to artifically create global cooling, because any limits on carbon emissions would have to be so strong that they would be politically unviabile, especially on a worldwide basis). But denying that global warming exists means you don’t believe in the scientific method or science in general. Do you believe in evolution? Your thinking is similar to how right wing religious folks think who don’t.

  • avatar

    Raisng the gas tax significantly–like by a dollar–could help keep money in Americans’ pockets. The logic is only slightly subtle. A higher cost of gasoline will reduce gasoline use, which will reduce the amount of money that can be charged per gallon. Thus, if we use a tax to raise the cost of gasoline to $3/gal, OPEC will be less able to raise the cost of petroleum. All the money that might have gone to OPEC once the economy starts to recover will go instead to the US Treasury, which could then reduce income taxes commensurately.

  • avatar
    bluecon

    I got another idea.

    Why don’t we tell the enviros to go away and drill for the huge amounts of available oil. Then we wouldn’t need to buy oil off the nutty people in the world.

    And while we are at it fire up the clean coal.

  • avatar
    findude

    findude – I think you have it a little backwards. Dealer lots were full of SUV’s because that’s what people demanded – not the other way around. Same with the silver Mercedes.
    This tells only part of the story. The manufacturers’ designers, marketers, and bean counters influence it as well as the dealers (in the aggregate).

    Go down to your local Mercedes dealer and try to buy a car without a sunroof or one with cloth seats. Very difficult in the USA. You will have to special order it (and pay a hefty four-figure special order fee). You also can’t buy an E-class with a manual transmission, though they happily sell them in most other markets.

    Surely some of the people who bought Chevy Suburbans in the last 10 years would have wanted a manual transmission as was available in the pickup equivalents in either 2- or 4-wd at a savings of about a thousand bucks. You could not buy one. Sure, this is a weird example, but I’m old enough to remember when 4×4 suburbans were only driven by surveyor teams; suburbanites seldom dreamed of them until the auto lobby got them classified as “light trucks” to avoid CAFE requirements and because the manufacturer’s profit margins on pickups and SUVs are better than on plain vanilla unibody sedans.

    When I went out to buy a Volvo 850 new, almost all the cars on the dealer lots were Turbos and GLTs because those had the best margins for the dealers. Sure, they would find you a base model 850, but only after they four-squared you to death and got your hands on the leather seats of the upscale models.

    Most car manufacturers charge an extra $500+ for metallic paint. Go to one of their dealers and you’ll discover that almost all the cars are metallic colors (typical exceptions are white, black, and red–but even those are going metallic now). I imagine metallic paint costs more and it may even be harder to apply, but when 80% of the cars at dealer lots near you are metallic, there’s about an 80% chance that any given buyer will drive out with metallic paint.

    Demand has a significant effect on supply, but much of the supply is driven by the objectives of the manufacturers, not consumers. Their goal is to sell us cars with good profit margins–not go give us what we want. It’s up to the marketing folks to see that we want what they are most interested in selling.

  • avatar
    CarPerson

    DAMN I love this new Dell 24-inch widescreen! TTAC on the left, MS Word on the right busily scribbling red lines under every other word for spelling transgressions…

    David Holzeman totally nails one of the points for gas tax vs. CAFE to decrease gas consumption. Taking his point to the conclusion: Downtown San Francisco was being sold building-by-building to overseas investors with money that came from the U.S. to pay for our imports. Now they are losing the city block-by-block to foreign investors.

    The Corporate Average Fuel Economy standards have been a disaster achieving the goal of getting people to buy the most fuel efficient vehicle that meets their needs (thus lowering overall U.S. consumption). Six months of $4.50 gas beat 30 years of CAFE.

    Bubba no longer buys an F250 to haul a dog, regardless of Ford’s recent gas mileage improvements. Those improvements mean squat to him. He’s adapted to a Tacoma with wheels, tires, and some body striping. That is the sea change only a tax increase achieves.

    For the family with teenagers, a full size Impala with an average of 17MPG will rot on the lot. At 24MPG, they will come around looking. CAFE will never get the full size vehicle gas mileage up there. A gas tax will.

  • avatar
    63CorvairSpyder

    @CarPerson:

    I don’t think that many Bubba’s are foregoing their F250s for a Toyota. You will have to rip the F250s(also Silverados and Rams) from their “Cold Dead Hands” before they will drive a Toyota pickemup………And the price of gas(tax) won’t change that.

    My opinion.

  • avatar
    quasimondo

    I have a small car and I still hate the high cost of fuel. To hell with this fuel tax.

  • avatar
    CarPerson

    When a $28 fill-up becomes $72 with the extra $$$ coming directly out of the weekly beer budget, that F250 doest look so good any more. Hammer a guy once a week like that at the pump and his heart and mind soon follow… He gets it. He downsizes.

    The CAFE regs are one-sixtieth as effective at getting the public to help cool the oil wars and slow the sending of American dollars overseas that come back to buy up America.

    People don’t see or feel CAFE. They do, however, sure as hell see the MPG reading on the window and sure as hell know what that means weekly at the pump where the gas tax awaits. THAT they can see, feel, and will respond to.

    If you want your gas and electric company in fresh new 1B debt and owned by foreign interests, move to the greater Seattle area. This is but one “invisible” cost of your freedom to burn as much gas as you feel entitled to.

  • avatar
    quasimondo

    A nissan sentra doesn’t look too good when a $20 fillup becomes $50 either.

  • avatar
    RangerM

    Makes perfect sense to me.

    Why should the automakers pay the CAFE penalties because you buy the wrong car, when (through artificially-high gas prices) they can get YOU to pay the money for them?

  • avatar
    SOF in training

    Everybody wants stuff from the Govt, but nobody wants to pay for it.

    Our next President is talking about a couple hundred billion (or more) for delayed road work and transportation improvements. 390 million gallons a day. How much per gallon in tax would it take to pay for it? How about if it was paid for over say 5 years? Do the math – How much would it cost per gallon to do what NEEDS to be done (whatever you think that is)? I made some wild assed guesses, and came up with a figure that I know I’m not willing to pay. But it’s gotta be done somehow… I know! Let’s pass it on to our kids!

  • avatar
    Stephan Wilkinson

    True, the Nissan $50 fillup doesn’t look good. But maybe it convinces you to make one trip a day rather than six–pick up the mail on the way to the gym and swing by the library on your way back, or whatever your routine may be. We’re all too used to jumping into the car whenever the spirit moves us rather than thinking–in the words of the old World War II gas-rationing slogan that probably one percent of this audience remembers, “Is This Trip Necessary?”

  • avatar
    63CorvairSpyder

    CarPerson said:

    “When a $28 fill-up becomes $72 with the extra $$$ coming directly out of the weekly beer budget, that F250 doesn’t look so good anymore. Hammer a guy once a week like that at the pump and his heart and mind soon follow… He gets it. He downsizes”.

    First, most of the “Bubba bars” that I happened to pass by this summer when gas was $4.20/gal. were loaded with Ford, Chevy and Dodge Pickups, not a Toyota to be scene.

    Second, there is tremendous peer pressure in the “Bubba Community” against foreign trucks.

    Third, no matter how high gas goes or the economy sinks, Bubba always seems to find his beer money. Priorities you know.

    Lastly, Bubbas that use their truck for work and most Bubbas do, know that a Tacoma can’t do the work that a “Real” Pickup does. Even a Tundra can’t… but even if it could your point would be moot as the gas mileage is about the same.

  • avatar
    John Horner

    The US’ medical care results (by any statistical measure), K-12 education system and roads are all worse than Western Europe’s. Damn those socialist leaning fools. Don’t they know that in all things, the US’ way is the best way? Harumph, they even fell for that metric system nonsense AND a multi-country currency.

  • avatar
    PeteMoran

    From a similar thread;

    The USA needs a comprehensive Energy Policy that provides a clear path for; efficiency everywhere, renewables, research and independence.

    Companies and governments can make decisions and get on with business.

    The USA needs to communicate to citizens that the use of fossil fuel energy is very likely to be extremely expensive, or hold the nation captive to outside interests.

    Obama might be the man…

  • avatar
    CarPerson

    63CorvairSpyder: First, most of the “Bubba bars” that I happened to pass by this summer when gas was $4.20/gal. were loaded with Ford, Chevy and Dodge Pickups, not a Toyota to be scene.

    No doubt they were vehicles which were purchased when gas was far less, many may be worth less than what is owed, or the lease has a way to go.

    What happens to the BBPLFEA (“Bubba Bar Parking Lot Fuel Economy Average”) in each of these scenarios:
    1) Keep gas at about $4.20 for 6 more months using a barrel-head tax.
    2) Raise the CAFE on pickups by 5MPG.

    I can confidently predict number 1 will result in the BBPLFEA going up much faster and higher than what CAFE will achieve in ANY length of time. He may opt for the light bar with 6 klieg lights and 6-inch lift kit, but you’ll find him bending the ear of the guy next to him at the bar that the Toyota isn’t half bad.

    Trying to do it on the supply side, as others have noted above, is a political decision by weasel politicians who wilt in the face of uninformed opposition. If it really must be done, it’s got to be done on the demand side.

    Dumping CAFE also takes the jackboot off the throat of the Detroit full product line auto manufacturers. CAFE is nothing short of a witchcraft brew using Voo Doo math.

  • avatar
    jimmy2x

    Basically increase the gas tax and decrease the payroll tax. Revenue neutral, slightly progressive. And it has the nice effect of taxing things that we want to discourage (fuel usage) and decreasing taxes on things we want to encourage (productivity).

    Its not neutral if your retired and living on a fixed income!

  • avatar
    Landcrusher

    Pardon my cynicism and sloth, for I skipped most of the comments here. So, if by some really strange chance, someone came up with some sort of REAL evidence that a gas tax is regressive, then please point it out. To be regressive, the poor would have to pay more than the rich for the tax. Unless, you want to change the definition of regressive without a non partisan reference other than claiming yourself an authority.
    Or, if someone on the left would be so kind as to tell me why saving the planet is only ever important when it can be done at the expense of those better off than the bottom third of the people in your own country (ignoring that in most of our countries, the bottom third live better than 90 something percent of the planet. I mean, is it better than little johnny can afford an Xbox now, or that his children actually HAVE a planet?
    I just want you guys to get your act straight. I understand the folks on the right who are against increasing the fuel tax, but I simply don’t get those on the left who believe in global warming or climate change, or whatever.
    Sorry for the ‘tude, but I have been down this thread before, and the discussion NEVER seems to get beyond these objections, but it it ALWAYS starts over again like we never got here.

  • avatar
    PeteMoran

    @ Landcrusher

    Not sure if this is your question, but;

    A tax is considered “regressive” if those of lower incomes pay a proportionally higher percentage of their income out for the tax in question than those on higher incomes.

    The actual dollar value might be the same for both, but proportionally, the lower income earner is paying more.

    A fuel tax would be regressive.

  • avatar
    Kurt.

    I sit here in Portugal reflecting about the recent gas global gas crisis this summer. Before the summer, I drove my Corvette most days as I could get gas from the US Military station in the $2.00 range. We paid more than the US average (that is how AAFEES fleeces the US Serviceman by disregarding their own rules – but that is a different rant) but it was still in my window of what I could afford. When gas went over $4.00 a gallon, I started driving my diesel Fiesta, but had to buy fuel on the local economy. That fuel was around 1€ per liter or $4.50 a gallon is what I had figured out at the time. Of course even at $4.50, it is cheaper to drive a Fiesta than a Corvette! All this is just background on my driving habits.

    What I wanted to point out is that while gas prices rose across America from less than $2.00 per gallon to $5.00, they only rose on the Portuguese economy by about .20 to .30 € cents. That was a big issue here because median incomes are lower than the US but it wasn’t the $3.00 increase seen on the Base or in America.

    This increase forced me to change my driving habits. I didn’t get rid of my gas guzzling sports car, but now I drive a more economical , lower footprint vehicle for my daily commute. Observing the local economy, I realized that having a floor and ceiling for gas prices is a good thing…however…I would hope Government would reduce taxation elsewhere to equalize the cost to the consumer – a tax neutral. Yet, I don’t have faith in my representatives for them to do that.

    Now that gas is down, I still drive the Fiesta and appreciate my 5.7L, 12 MPG, tire smoking beast just a little more.

  • avatar
    geeber

    People who think that a higher fuel tax is going to result in a gusher of new revenues for the federal government are either dreaming or hopelessly naive…to get this passed, there will have be corresponding cuts in other taxes.

  • avatar
    Pch101

    someone came up with some sort of REAL evidence that a gas tax is regressive, then please point it out. To be regressive, the poor would have to pay more than the rich for the tax.

    There’s nothing to debate here, it’s just a defined economic term.

    A tax that is regressive comprises a larger proportion of one’s income as income decreases. It’s not a politically charged statement, it’s a mathematical calculation.

    The reason that a gas tax is regressive is because higher income earners pay an amount of tax that is a lower percentage of their incomes. This is a reflection of the fact that fuel consumption does not typically rise proportionally with increases in income, or vice versa, i.e. an affluent household with an income level three times that of a working class household is unlikely to use three times more fuel or accordingly pay three times the amount of fuel tax.

    I think that you may be seeing “regressive” as a pejorative term. In an economic context, it isn’t, no more than “progressive” is necessarily a positive. It’s a neutral descriptor, that’s all.

  • avatar
    regular87.com

    I am completely in favor of alternative energy and believe that one day the government will need to replace the gasoline tax as vehicles are becoming more efficient and tax revenue intended to fix roadways and bridges is lowering in comparison to the amount of miles traveled per gallon sold.
    I think taxing vehicles that do not use gasoline or putting extra taxes on vehicles would be counterproductive in moving us away from dependence on foreign oil.
    Rather than taxing miles driven, I believe it would be better for the government to raise the tax on gasoline. States should look at a percentage gasoline tax, especially while the price of gasoline is “low”. Then as the economy strengthens and gas prices increase, so will state revenue from gasoline taxes. This will reward efficiency and create a tax that will not hurt economic recovery. http://www.regular87.com

  • avatar
    Landcrusher

    Pete and PCH,

    I will happily accept that definition. The only problem with it is that because the tax can be voluntary (you can choose to drive around for entertainment, and many poor people do), what is actually paid, and what NEEDS to be paid are too seperate things. I suspect cigarette taxes are regressive, much like you suspect the fuel tax is regressive.
    However, do we actually know that the poor pay more than the rich? Does a one car family spend more than a multi SUV, sports car, riding mower, ski boat family? And then, what about the indirect payment of the tax through consumption of goods and services with imbedded fuel costs?
    We all suspect that those with really high income pay a smaller percentage than those who are merely Democrat defined rich (250 plus, rather than say 500 plus). Does that make the income tax regressive?
    Also, if you look at the fuel tax as part of the overall scheme, can you honestly say it even matters? The family that makes twice as much, is paying four times as much, or more in income taxes already. Even if you TRIPLED the fuel tax, it wouldn’t alter the balance at all. Even then, Obama promises to put in an offsetting credit for low earners.
    In my view, the regressive argument has no place in the fuel tax debate. It’s a total red herring. It ignores the environmental concerns. It ignores any sense of proportionality, and it ignores that most people drive a lot more than they need to.

  • avatar
    Pch101

    The only problem with it is that because the tax can be voluntary (you can choose to drive around for entertainment, and many poor people do), what is actually paid, and what NEEDS to be paid are too seperate things. I suspect cigarette taxes are regressive, much like you suspect the fuel tax is regressive.

    We’re just dealing with economic averages here. On the whole, fuel taxes paid as a percentage of income decrease as incomes increase, given the nature of the tax. It may not be true in every case, but the data should support that.

    In my view, the regressive argument has no place in the fuel tax debate. It’s a total red herring. It ignores the environmental concerns. It ignores any sense of proportionality, and it ignores that most people drive a lot more than they need to.

    It would depend upon how you view the purpose of the tax and the political views of whoever is opining on it.

    If you view the tax strictly as a usage tax, such as paying for roads, then a liberal could oppose it because liberals tend to favor progressive taxation and consider regressive taxes to be unfair.

    If you view the tax as a tool for modifying behavior, then the regressiveness becomes less relevant. Philosophically, a conservative may not object with the regressiveness in the first place. A libertarian would almost certainly favor pay-as-you-go usage, and would object to the very idea of a progressive tax as a form of taking.

    I happen to believe that the behavior modification aspects are more important in this case than the usage aspects, so I would favor the increase. If we are concerned about the plight of the poor, I believe that there are other ways to make up for this particular tax increase, such as income tax credits.

  • avatar
    Landcrusher

    “We’re just dealing with economic averages here. On the whole, fuel taxes paid as a percentage of income decrease as incomes increase, given the nature of the tax. It may not be true in every case, but the data should support that.”

    The data should support that, but does it? My suspicion is that if the fuel tax were half a dollar or more, the behaviors would change in a short time such that it would NOT be regressive at all. If it even is now. CAFE has had, IMO, the opposite affect while helping destroy the domestics.

    As for the rest of your points, I can more or less agree with them. I just would like the liberal folks to try to have SOME touch with reality when dealing with these numbers and issues. It usually seems that the only time the environment is important is when the wealthy can be dunned for the bill. I also don’t know any many non-reactionary conservatives who would not be bothered by regressiveness of taxes. OTOH, there are plenty who have been so pushed by the existing system who would say they are for one out of spite. In the end though, most real conservatives think that less government is the best thing to help poor people, not more. IMO, a real conservative thinks that if someone has nothing but their own labor to get by on, then they can likely get ahead really quickly if the government stays out of their lives.

  • avatar
    M1EK

    1. The market didn’t demand SUVs; Detroit created that market in order to get around CAFE.

    2. Some gas taxes are diverted, but a far larger amount of subsidy goes the other way – from roads that you pay gas tax on while driving but are funded by local entities to simple flat-out ‘donations’ of general funds (property/sales taxes) for highway projects.

  • avatar
    Pch101

    The data should support that, but does it?

    I can’t claim expertise in this subject, but I think that you’ll find that studies universally indicate that the income elasticity of gasoline demand is something below 1.0. In English, that means that the proportionate increase in demand for gasoline goes up at a lesser amount than a given increase in earnings, and vice versa.

    As are other necessities, gasoline is a “normal good”, and normal goods all behave like this. Luxury goods tend to be demanded in the fashion that you suggest, as you would guess — those who earn more money are more likely to increase their appetite for Aston Martins and Bentleys than is the case with a poor person who earns a similar increase. Gasoline is not a luxury good, and therefore doesn’t behave like that.

  • avatar
    PeteMoran

    @ Pch101

    Good explanation.

    The other thing about inelastic supply essentials is that there tends to be a high lag time before switching to alternatives occurs. A bit like a frog in cold water being brought to boil.

    That leaves the market for those essentials easily manipulated as OPEC have done in the past and are desperately attempting to again right now.

    One of the great things about renewable energy economics, is that the cost of supply is fixed because the fuel variable is removed. There’s no reason for the cost of renewable electricity to dance around for example.

  • avatar
    Landcrusher

    PCH101,

    That inelasticity to income ratio would have not take into account any imbedded fuel cost. Also, I am not completely sure on the rules, but I don’t think that necessarily means you use the same amount, only have a lesser reaction to price changes? Not really sure on that.
    Lastly, ignoring imbedded fuel taxes, if the main tax on families is hyper progressive like the income tax, and the pitiful little fuel tax is slightly regressive while accounting for 1% of the income tax does it matter? Does it still matter when the only people for whom the tax should be an issue are likely getting an unearned tax rebate larger than their fuel tax contribution?
    This “regressive” objection is so full of BS, it simply needs to be ridiculed to improve the level of public discourse.

    Pete,
    Taking out the fuel component will reduce, but not at all eliminate price fluctuations. Think about it. Supply and demand will still be in flux.

  • avatar
    Pch101

    I don’t think that necessarily means you use the same amount, only have a lesser reaction to price changes?

    It doesn’t mean that consumption doesn’t increase at all. It just means that consumption doesn’t increase to the same degree as the income increased. The appetite for gas doesn’t rise in equal proportions to the income.

    This is pretty conventional economic theory. You’d have to come from a very different place to hold a different position. Gasoline is a commodity good, not a luxury, so it would be an extraordinary situation if it behaved in the fashion that you believe.

    Lastly, ignoring imbedded fuel taxes, if the main tax on families is hyper progressive like the income tax, and the pitiful little fuel tax is slightly regressive while accounting for 1% of the income tax does it matter?

    As a percentage of a poor person’s income, the amount of the increase amounts to a lot of their money. They have very little cash to work with, so when you double the price of this good for them, they will certainly suffer a hit.


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