In a generally well-written article, HPR staff writer Will Rafey recently addressed the need to raise the gas tax “to make the private cost of driving a car reflect its actual social costs: global warming, air pollution, traffic congestion, and highway maintenance,” and how difficult this has become in the current political climate. I have no disagreement with the thrust of his argument, but would respectfully take issue with his characterization of what he calls the “anti-tax establishment.”
In Will’s article, William Gale, senior fellow at the Brookings Institution and co-director of the Tax Policy Center, opines that the anti-tax movement, in which he includes Americans for Tax Reform and the various Tea Parties, “just hate all taxes,” and will therefore oppose any tax increase. But it’s not entirely that simple. I don’t presume to speak for ATR or the Tea Parties per se, but fiscal conservatives generally recognize what Chief Justice John Marshall observed in McCulloch v. Maryland, that “The power to tax involves the power to destroy.” Government should not use the tax code to pick winners and losers, so to speak, since it can effectively outlaw activities through excessive taxation, hindering a given industry to the point that it can no longer operate profitably. In the next section of the article, Will notes that the gas tax “raises a thorny issue of fairness,” since some citizens drive more than others; this fairness question in fact applies to all excise taxes, and places government in the position of arbitrarily redistributing income from one group of citizens to another in the name of what it considers the general welfare. Citizens and politicians, moreover, frequently disagree as to just what constitutes the “general welfare,” and therefore differ as to which industries and activities should be promoted and which discouraged. Given these facts, it is better in most cases to allow the market to answer this question, and to confine federal tax policy to either a flat income tax or a consumption tax.
Carbon consumption is a very rare instance in which a corrective tax is warranted, given the broad bipartisan consensus that America must wean itself from dependence on oil: even citizens who reject the notion—or the urgency—of climate change would generally agree on the need to curb the massive wealth transfer to rogue oil-producing countries. Will is correct in his implication that what he calls the “anti-tax establishment” thinks taxes in general are too high and would oppose any tax increase. What he appears to overlook is that it is not necessary to raise the overall tax rate in order to discourage gas consumption through the tax code. He briefly mentions that rebates might be used to “correct the regressive elements of the tax,” but why not simply return the entirety of the gas tax revenue through a rebate? Better yet, why not use the extra revenue from the gas tax increase as a means to cut the income tax rate to both encourage energy conservation and alternatives and spur economic growth at the same time? I’ll confess I don’t know how the “anti-tax establishment” would respond to such a proposal, but I find it hard to believe that a revenue-neutral proposal that reduces our dependence on sponsors of terrorism and involves an income tax rate cut would elicit significant opposition from the Right.
Parenthetically, a gas tax is not the only way to reduce oil consumption, and probably not the best. As I have noted in the Harvard Salient (though I am by no means the first to do so), a revenue-neutral carbon tax would be more comprehensive, and probably cheaper to collect. I have also explained in the HPR that urban traffic congestion could be substantially reduced through congestion pricing, which has been used with great success abroad.
All that said, Will is absolutely right that government should take action to reduce gas consumption, that the tax code is probably the best way to do this, and that the American political environment makes this extraordinarily difficult. But it’s not fair to blame the “anti-tax establishment” as an obstacle to reform when what he is talking about could easily be achieved without a net tax increase.
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