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Raise the gas tax now!

Written By: Jason Shafrin - Nov• 19•08

It’s time to raise the gas tax.  An economist proposing a tax increase?  Yes.

Increasing taxes overall is rarely beneficial for the economy, but raising the gas tax will increase the welfare of the country.  In earlier posts, I wrote that a higher gas tax makes a lot of sense.  An increased gas tax will reduce driving which will have two beneficial effects: less traffic and less pollution. One could use the added funds from the gas tax to improve public transportation, improve infrastructure, or reduce taxes on income or other goods.

Why is now the time to raise the gas tax?  

  1. When gas prices were over $4 per gallon, raising the gas tax was politically infeasible.  Now, however, with the price of gas under $2.50 in San Diego, a gas tax increase of 50 cents per gallon would still keep gas prices under $3 (which doesn’t sound too bad anymore). 
  2. Furthermore, the government is looking for new revenue sources to plug its huge deficit and the gas tax is one solution.  
  3. Finally, since the elections have just taken place, politicians have some measure of job security at least for a few years.  With this added job security, Congressmen and Congresswomen can increase the gas tax without having to worry about pandering to voters. 
Less traffic, less pollution, and more money for debt or tax relief.  An increase in the gas tax is a win-win proposition.

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  1. THEGAP says:

    As an european consumer I am not convinced by your advice. Raising taxes is not the problem. The problem is what will you do with this huge amount of money. if you diminish the fed state debt OK. If you use it to spend even for useful purposes you put a dangerous pressure on the next generation.

  2. Akshay Kapur says:

    As a country, this makes sense. Locally, I can’t see commuter cities buying in. The benefit simply isn’t absorbed internally, even with all the marketing these days about going green. Consumers need alternatives before they’ll agree and unfortunately those alternatives will only emerge after they do so, so its a catch-22.

  3. lucharlie says:

    I kinda get it, but not really. The problem with raising the gas tax is that it puts additional strain on other industries rather than just commuters. Think about shipping for durable goods. Raising prices on gas will raise the price on shipping to small businesses and even larger corporations. In order to get a box of cereal into the store, the small business owner will have to raise his price of the cereal due to the raise in shipping prices.

    It all affects each other don’t you see?

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