Incentives vs Gas Tax: Gingrich vs. Friedman, Inglis, and Laffer

Newt Gingrich is against a gas tax, a carbon tax, or a cap and trade system. He is just against any kind of “tax.” He supports government efforts to curb greenhouse gases and to reduce our use of imported oil. Only his policy preference is for incentives. He often cites the incentives Lincoln gave the transcontinental railroads (lots of land), saying “We did not build the transcontinental railroads by punishing the stage coaches.” He sees government’s role as designing appropriate incentives for a whole range of alternative forms of energy. (see here for video of Gingrich’s interview with Fareed Zakaria).

 

Governor Kulongoski and the Oregon legislative Democrats seem so far to be in Gingrich’s camp on this issue – incentives but no significant gas tax.

 

On the other hand, two op-ed articles in the NY Times (12/28/08) argue for a gas tax. Tom Friedman argues (here):

 

…Today’s financial crisis is Obama’s 9/11. The public is ready to be mobilized. Obama is coming in with enormous popularity. This is his best window of opportunity to impose a gas tax. And he could make it painless: offset the gas tax by lowering payroll taxes, or phase it in over two years at 10 cents a month. But if Obama, like Bush, wills the ends and not the means — wills a green economy without the price signals needed to change consumer behavior and drive innovation — he will fail….

… There has to be a system that permanently changes consumer demand, which would permanently change what Detroit makes, which would attract more investment in battery technology to make electric cars, which would hugely help the expansion of the wind and solar industries — where the biggest drawback is the lack of batteries to store electrons when the wind isn’t blowing or the sun isn’t shining. A higher gas tax would drive all these systemic benefits.

The same is true in geopolitics. A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech.

Which one of these things wouldn’t we want? A gasoline tax “is not just win-win; it’s win, win, win, win, win,” says the Johns Hopkins author and foreign policy specialist Michael Mandelbaum. “A gasoline tax would do more for American prosperity and strength than any other measure Obama could propose.”

Republican Congressman Bob Inglis and Economist Arthur B. Laffer argue in their NY Times op-ed “An Emission Plan conservatives Could Warm To” (here):

…We need to impose a tax on the thing we want less of (carbon dioxide) and reduce taxes on the things we want more of (income and jobs). A carbon tax would attach the national security and environmental costs to carbon-based fuels like oil, causing the market to recognize the price of these negative externalities….

… It is essential, therefore, that any taxes on carbon emissions be accompanied by equal, pro-growth tax cuts. A carbon tax that isn’t accompanied by a reduction in other taxes is a nonstarter. Fiscal conservatives would gladly trade a carbon tax for a reduction in payroll or income taxes, but we can’t go along with an overall tax increase….

 

So, some conservative support exists for a revenue neutral gas tax.

Of course, any gas tax increase, even if offset completely by other tax reductions, faces political headwinds. Lots of public and voter education is needed. Oregon Democrats need to lead. The Oregon legislature needs to draft revenue neutral gas tax legislation, to hold hearings on it and to get the issue out for discussion, and then, if President Obama has not made a national gas tax proposal by the end of the 2009 session,n to refer a revenue neutral gas tax measure to the Oregon voters. It’s the responsibility of the governing Democrats to do this.

 

 

Comments

[sherry]

Of the money we have seen thrown around thus far let me ask you this, that 168 billion that our country borrowed to give away to us in the form of an "economic stimulus package" ...did it do a darn thing to create jobs or stimulate our economy? NO, nothing. And we borrowed the money from China.

This past year the high cost of gas nearly destroyed our economy and society. More people lost jobs and homes as a direct result of that than any other factor in our history.

Fannie and Freddie continue to get all the blame. Of all the homes I have seen lost in my area SW FL and believe me I have seen many, none were due to an adjustable mortgage. They were due to lack of work.

Families went broke at the pump alone. Then added to that most saw record rate hikes at their utility companies. The high cost of fuel resulted in higher production and shipping costs that were passed on to the consumer, in most cases higher prices for smaller packaging.

Consumers tightened their belts, cut back, went out to eat less or stopped totally. Drove around on tires that needed replacing longer, some even quit buying medicines they really need.Unfortunately cutting back and spending less results in even more layoffs. A real economical catch-22.

And, as we are doing the happy dance around the lower prices at the pumps OPEC is planning to cut production to raise prices. They are even getting Russia in on the cutbacks. Oil is finite. We have used up the easy to get to reserves already. It will run out one day.

We have so much available to us. Solar and Wind are free sources of energy. Of course to get the harnessing process set up is somewhat costly it is still free energy.

It would cost the equivalent of 60 cents per gallon to charge and drive an electric car. The electricity to charge the car could be generated by solar or wind at least in part and in most cases totally.

If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. What a powerful resources we have neglected.

Jeff Wilson has a profound new book out called The Manhattan Project of 2009 Energy Independence Now. http://www.themanhattanprojectof2009.com Powerful, powerful book! Also, if you think electric cars are way out there in some futuristic lala land please check out the web site for a company Better Place. http://www.betterplace.com/ they are setting up infrastructures in San Francisco, San Jose and Oakland as well as the state of Hawaii to accommodate electric car use.

I think we need to rethink all these bailouts and stimulus packages. We need to use some of these billions to bail America out of it's dependence on foreign oil. Create clean cheap energy, create millions of badly needed new green collar jobs and get out from under the grip foreign oil has on us. What a win -win situation that would be for America at large

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