We need a gas-tax hike, not a tax holiday
WE AGREE with the conclusion of the Daily News editorial ("Gas Pains," May 1) on the proposed gas-tax holiday.
WE AGREE with the conclusion of the
Daily News
editorial (
"Gas Pains," May 1
) on the proposed gas-tax holiday.
It's a very bad idea, but your economic analysis was a bit shaky, and your recommendation was timid.
Basic economics does not say that "gas prices would stay the same or go up if the holiday were implemented," as you wrote.
Rather, basic economics says that if the federal gas tax were eliminated, gas prices would be lower than they would be if the tax were not eliminated.
Gas prices might go up for other reasons, like summer driving, geopolitics, China's growth or other factors, but no matter what influences such factors may have in the future, a tax holiday would cause the price of gas to increase less (or decrease more) than it would have if the tax were retained.
"Common sense" seems to suggest, then, that a gas-tax holiday would be a good idea because it would lead to lower prices, but in this case common sense is misleading. A gas-tax holiday is a bad idea precisely because it would lead to lower gas prices.
The price of gas is actually too low right now.
How do we know that the price of gas is too low? The current price of gas doesn't cover the true cost of using gasoline. The tax portion of the current price is insufficient to provide the funds necessary to maintain our roads and bridges, and the non-tax portion fails to cover the environmental cost of using gasoline.
Because the price of gas is too low, we are using too much gas and building too much driving into our lives by neglecting transit investment and encouraging urban sprawl. So let's put aside this talk of holidays and talk about raising the price of gas by increasing the gas tax.
"But wait a minute," you say, "we can't afford to buy gas at the current price." Not true. We can afford it, we are affording it - and that's the essence of our problem. If the price were still higher, we couldn't afford to buy the quantities of gas we're buying today, so we would conserve - not just because conservation is the right thing to do, but because it would be the only thing we could afford to do.
But what about the poor - won't they be hurt the most?
The poorest among us don't drive much. Thirty-two percent of Philadelphians, many with low incomes, don't own a car. Clearly, some low-income folks will feel the pinch of higher gas prices, but they, like folks with higher incomes, have to be strongly encouraged to reduce their consumption of gasoline.
So, imagine that we were to raise the federal gas tax. The first months of high prices would be very difficult for many people, so they would begin to make it easier on themselves by cutting out unnecessary driving, by car-pooling and by using public transit more often.
These short-run adjustments wouldn't be enough to ease the financial pain, however, so over time people would reduce their necessary driving by moving closer to their workplaces.
In addition, they'd purchase more fuel-efficient vehicles, vote for more investment in public transit and support transit-oriented development.
It's politically easier, of course, to advocate the tax holiday, but those who seek to lead the nation for the next eight years would be well-advised to imagine where we might be today if we'd raised the tax eight years ago.
We would have purchased more fuel-efficient cars, shortened our commutes, invested more in public transit, used less gas, reduced our carbon footprints, repaired more roads and bridges, imported less oil, reduced our trade deficit and strengthened the dollar.
Is it time for a tax holiday? No, it's time to end our extended vacation from reality and get to work on conservation. *
David L. Crawford and Richard P. Voith are principals of Econsult Corp. and adjunct professors at the Wharton School of the University of Pennsylvania.