Robert Reich says that a gasoline tax is not politically feasible. He may be right. But it seems to me that it is something that a president Obama, with his gift of oratory and his current high level of popularity, might be able to get done.

The demand for gasoline is highly elastic. The sharp rise in prices caused consumption to decline and led consumers to start shifting towards more fuel efficient cars. As consumption declined, gasoline prices collapsed and there is a high likelihood that this will cause consumption to begin rising again which, eventually, will lead to higher prices.

We have no choice with regard to the future price of gasoline; it will go back up. But we can allow the gasoline price to go back up without additional taxation, and have the money be shipped overseas, or we can increase the tax on gasoline, and have more of the money stay here.

Alternative fuel vehicles, whether electric, or hydrogen, or something else, are not competitive with gasoline, even at prices well above current levels. These vehicles will require government subsidies which will have to come through taxation. Why not use the revenues derived from higher gasoline taxes for this purpose?

I am not one who favors tax increases. But this is one tax that makes sense to me.

I think a floor on gasoline prices in order to encourage conservation is a great idea, but it is not going to happen. Please read the Robert Reich column I referenced in post #2 and let me know what you think.

“The need for tax shifting—lowering income taxes while raising levies on environmentally destructive activities—has been widely endorsed by economists. For example, a tax on coal that incorporated the increased health care costs associated with mining it and breathing polluted air, the costs of damage from acid rain, and the costs of climate disruption would encourage investment in clean renewable sources of energy such as wind or solar.

For a gasoline tax, the most detailed analysis available of indirect costs is found in The Real Price of Gasoline by the International Center for Technology Assessment. The many indirect costs to society—including climate change, oil industry tax breaks, oil supply protection, oil industry subsidies, and treatment of auto exhaust-related respiratory illnesses—total around $12 per gallon ($3.17 per liter), slightly more than the cost to society of smoking a pack of cigarettes. If this external or social cost is added to the roughly $3 per gallon average price of gas in the United States in early 2007, gas would cost $15 a gallon. These are real costs. Someone bears them. If not us, our children. Now that these costs have been calculated, they can be used to set tax rates on gasoline, just as the CDC analysis is being used to raise taxes on cigarettes.

Gasoline’s indirect costs of $12 per gallon provide a reference point for raising taxes to where the price reflects the environmental truth. Gasoline taxes in Italy, France, Germany, and the United Kingdom averaging $4.40 per gallon are almost halfway there. The average U.S. gas tax of 47¢ per gallon, scarcely one tenth that in Europe, helps explain why more gasoline is used in the United States than in the next 20 countries combined.

Phasing in a gasoline tax of 40¢ per gallon per year for the next 12 years, for a total rise of $4.80 a gallon, and offsetting it with a reduction in income taxes would raise the U.S. gas tax to the $4–5 per gallon prevailing today in Europe and Japan. This will still fall short of the $12 of indirect costs currently associated with burning a gallon of gasoline, but combined with the rising price of gasoline itself it should be enough to encourage people to use improved public transport and motorists to buy the plug-in hybrid cars scheduled to enter the market in 2010.”

What do you think of this idea, a cap and trade system, presented by Robert Reich?

http://robertreich.blogspot.com/