Ian Ayres suggests a gas tax that would start off with a rebate:
The government would offer a $500 advance tax rebate each year for every car you choose to sign up for the tax. In return, you would commit to pay an extra $1 for each gallon of gas you buy.
For obvious reasons, I like this idea–I’d like to get that extra $500. And since the government is giving out stimulus money anyway, now’s the time to try it!
But I’m puzzled by their suggested implementation:
The actual tax paid would be based on miles driven and fuel economy. Thus a Chevy Impala rated at 19 m.p.g. would be charged $5.26 each 100 miles, while a Prius rated at 46 m.p.g. would be charged $2.17 per 100 miles.
Wouldn’t it be simpler to just charge $1 per gallon of gas (with people who didn’t get the rebate getting some sort of sticker exempting them from the tax)? Why have a complicated system based on miles per gallon when you can simply tax the gas itself?
In any case, I get Ayres’s main point which is that this rebate system is more of a way to make things psychologically palatable to people than to be a realistic policy suggestion.
Perhaps another way to go on this would be to follow the “you polluted, you clean it up” policy, by which the tax is more directly tied to the cost of keeping the roads going, securing the supply of oil, cleaning the air, retrofitting coal plants to pollute less, etc. Maybe people would be less unhappy paying a higher gas tax if it were clearly going to maintaining the transport system and cleaning up the pollution it creates?
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I guess that what he is reporting are the conversions from gallons to the actual cost incurred by the driver based on what car she drives. In other words, if everyone pays 1 dollar tax on each gallon they consume, then the actual cost *per mile driven* depends on how efficient one's car is. If your car is efficient, the tax per mile is low; if your car is inefficient, the tax per mile is high…
Since the tax $ would never go to clean tech, than the tax needs to be both punitive and provide an incentive to use less fuel. Thats what I thing they are trying to accomplish.
BK
One problem with a non-universal gas tax would be someone not registering their car, and then selling gas to everyone else with a profit of 50 cents. I think that obvious cheat is defeated by taxing someone on miles driven.
I think the point is that by taxing the gas, higher MPG implies lower per mile cost, not that you actually change the tax rate depending on who pulls up to the pump.
But perhaps me means that at the end of the year you go somewhere and they report your odometer and then you pay an approximate net cost for that year as a one time tax?
Here in CA the gas tax is high, but it in theory goes only to roads, and we have a pretty good set of roads (especially compared to the northeast), so it's a pay-per-use type of tax.
I agree taxing the gas is better for multiple reasons. Driving/accelerating fast wastes gas. So does driving in stop and go traffic. A gas tax encourages people to avoid these behaviors.
The only benefit I see to Ayres proposal is that it requires nothing of people who don't opt in. This could be a significant political advantage.
I think the complicated system puts the burden on the people getting the money. The discount would put the burden on gas stations. Not necessarily the best system, but it gets the opt-in incentives right.
How about something even simpler: charge an extra $1/gallon (or, better, $2) tax for each gallon of gas, and every month, divvy up the proceeds among everyone in the U.S. No need to sign people up, see who has stickers, etc. This would be a pure transfer from people who use more gas than average to people who use less, to compensate for the pollution, greenhouse gases, and so on, that the high-gas-users impose on the low-gas-users. Of course it should apply to all fossil fuels, not just gasoline (which means, Andrew, that you'll be a net loser, as will I, due to the aviation fuel that we use).
By the way, this is a serious suggestion and I think such a tax would be a very good idea.
The point on miles driven/fuel economy is not about implementation (the Prius owner and Impala owner would both be charged $1/gallon). It's merely illustrating that by tying the tax to gallons purchased, in effect, ties the tax to fuel economy (rewarding Prius owners over Impala owners, ceteris paribus).
Phil,
I agree that the pure energy tax makes a lot of sense. But that's an idea we've all heard about, and Ayres's suggestion was new, which was why I brought it up. My impression is that Ayres thinks that, for psychological reasons, his idea would fly politically whereas the fuel tax might not. I dunno but I thought it was worth thinking about.
P.S. How'd ya know I drink aviation fuel on the side??
If you have two cars, register one for the rebate and use the other to get around then you get the best of both worlds. The rebate and cheaper tax.
This seems a system way to open to fraud.
Andrew,
You ask how I know that you guzzle aviation fuel. In another post you mentioned that you are going from NY to the West Coast. I figure you're not riding your bike. That's about 5000 miles of flying, for this one round trip, and I know it's not your only trip this year.
Looks like this system is wide open for fraud.
I do agree in Ayres suggestion that government should offer a $500 advance tax rebate each year for every car you choose to sign up for the tax. In return, you would commit to pay an extra $1 for each gallon of gas you buy. First of all you’ll be more concern in saving more gas and it will minimize the air pollution. Nowadays, lot of people can't find their way back to their accustomed standard of living, possibly due to a drop in income, and this leads them to being struggling consumers. Well, it isn't a great idea to go back to the way things were, spending freely regardless of any temporary money problems that come up. The titanic amount of leveraged credit led to a volatile market and economy. The Federal Reserve reports up tick in some activity, but consumer activity has dropped off. Doubtless that many financiers would use short-term loans to get the struggling consumer back to normal.