Increasing the Gas Tax
Your Dec. 20 editorial “Two for the Price of One” states that it is time to educate the public to make a vastly increased federal motor fuel tax “more politically palatable.”
Like many proponents of a much higher gasoline tax, the editorial overstates the benefits and underestimates the real cost of such an unwise action. Independent analysis of large increases in gasoline taxes concluded that they reduce economic growth, increase unemployment and contribute to inflation. The mandate of our recent election was to boost the economy; not break it. In addition, a higher levy on gasoline amounts to a tax on Americans’ mobility, the mobility that has been a key component of our prosperity, competitiveness and a reflection of individual freedom.
A more meaningful approach would look at the issue of the use of gasoline taxes to raise general revenues. Logically, such a proposal should depend on three considerations: the efficiency of such taxes relative to other revenue-raising methods, the equity of such taxes compared to other revenue-raising alternatives--a consumption value-added tax, for example--and whether decreased government spending is socially preferable to increased taxes.
A steep gasoline tax increase would fall well short of the pot of gold that gasoline tax proponents envision. According to Data Resources, a private economics consulting firm, an increase of 50 cents per gallon would not generate $50 billion in new government revenue because of the real cost of such a move--retarded economic activity, a rise in unemployment and aggravated inflation.
The editorial neglected to mention that state and federal excise taxes already represent a significant portion--on average more than 35 cents per gallon--of what motorists pay for motor fuel. Over the last 10 years, combined state and federal gasoline excise taxes have more than doubled, amounting to an annual $41-billion bill.
You want to use the gasoline tax money for deficit reduction--and--use the money for more spending on “good” things. You can’t have both!
WILLIAM F. O’KEEFE
Executive Vice President
American Petroleum Institute
Washington
