Gasoline Tax

Several months ago, when oil prices were dropping, there were suggestions that an increased federal tax on gasoline or an import duty on oil would be a nearly painless way of increasing federal revenues to offset part of the budget deficit. Now that tax reform is nearly behind us and we turn our attention to the ominous budget and trade deficits, such a tax has much in its favor.

The price of oil seems to have bottomed out and there are signs that OPEC’s strategy of forcing up prices by restricting supplies is working. An added federal tax on motor vehicle fuel of, say, 20 cents a gallon ($100 for 10,000 miles driving in a car that gets 20 miles per gallon) would raise something like $10 billion a year in additional revenue while reducing demand for oil. This reduced demand would exert downward pressure on prices and, by cutting the need for oil imports, would help with the trade deficit.

The net effect at the pump may be about the same. We can let OPEC raise prices and enrich the producer nations or we can raise the prices ourselves for the benefit of our own economy.

HOWARD L. GLASS

Orange