Gasoline Tax - A Further Examination

The dependence that the United States has on foreign oil is undisputed. Much of this foreign oil comes from politically volatile nations, often with foreign interests directly at odds with America. Venezuela and Iran are two glaring examples. Much ado has been made of America’s dependence on these nations, yet little has been done to curb it. Indeed, the United States is hamstrung, both abroad and at home, by its reliance on other nations for oil. Something must be done.

Pigou taxes, those that correct a market externality, appear to be taxes that correct social imbalances, or market deficiencies. A Pigou tax, for example, is a tax on cigarettes or alcohol. Yet Pigou taxes can have more far-reaching effects. A tax on gasoline consumption, another example of a Pigou tax, would not only lead to benefits domestically, but would also contribute to reducing America’s dependence on foreign oil. The Boston Herald reports that when asked if he would support an increase in the gasoline tax, former Chairman of the Federal Reserve Alan Greenspan said, “Yes, I would. That’s the way to get consumption down. It’s a national security issue.” And indeed it is. A higher gasoline tax would reduce gasoline consumption, and thus reduce the amount of gasoline America imports from abroad.

Such a reduced reliance on foreign oil-producing countries would certainly give the United States more flexibility in foreign affairs. And if one is to believe the arguments that it is oil that motivates America to involve itself in wars abroad, then a reduced reliance on the unstable countries that produce oil could perhaps even reduce the possibility of war.

Yet this is merely conjecture. And while such conjecture may indeed be correct, can such guess-work, and indeed political gerrymandering, be used to justify a significant hike on the consumption of a good many Americans deem indispensable? Perhaps it can, but it is most likely the belief of most Americans that their individual consumption of oil has little to do with America’s involvement in foreign conflicts. Therefore greater incentives are needed to make a rise in gasoline taxes more politically palatable.

Luckily, such incentives exist. The effect of gasoline consumption on the environment is becoming more and more apparent. The threat of global warming looms, and America is the world’s largest emitter of carbon dioxide. It is imperative, therefore, that America curtail its consumption of gasoline. And as it is known that the burden of a tax is shared by consumer and producer, it can be assumed that a gasoline tax will not only curb gasoline consumption, but also gasoline production. Instead, alternative energy sources will be invested in, and the reliance on gasoline will be further reduced.

The argument for a raise of the gasoline tax can be made on many more fronts. Increased revenue for the government, regulatory relief, economic growth and the reduction of road congestion are all likely byproducts of an increase in the gas tax. Yet it is the issues of national security and environmental concern that make an increase in the gasoline tax not just ideal, but imperative.