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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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…

“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.

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!

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?

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.