Green Taxi

I’m throwing this out there a bit randomly, but here is a suggestion for President Obama to help fix the economy through green mandatory innovation.  The government should impose a gas tax that keeps gas prices at $3.00 or higher.

This idea come after inspiration from Dan Rosenblum’s comment that lead to two NYT articles (” The Gas Tax” and “Win, Win, Win, Win, Win…“) on a Gas Tax.  The psychological theory behind this tax is that as gas prices come off, people are more likely to go back to old habits of buying gas guzzlers.  This has already been proven in the 70′s and is being proven again in December 2008 as Trucks and SUV’s outsell cars for the first time since February 2008 on the recent decline in gas prices.

Good for Detroit

The economic point behind the plan is that the government needs to raise cash to help pay for this giant amount of debt we have taken on over the last year by bailing out the financial and auto industry.  I support a tax, or tariff rather, on used services much more than on income.   If I do not want to pay this tax it is my duty to figure out how to drive less or more efficiently.

Lastly, this should help support the auto industry.  These bailout packages are supposed to encourage Detroit to make more fuel efficient cars, but if they stick to building trucks, due to short term consumer demand, they will remain stuck with the same potential problem that haunted them this year.  Only by chasing Toyota and Honda, by building more fuel efficient cars, will Detroit be able to survive the next big rally in oil prices.   Keeping gas prices high will force Detroit to run their businesses for the long haul, which they have proven they cannot do that themselves.

Gas Price Floor

The plan for a $3.00 floor works as follows.  If gas stations can buy their gas for cheaper (say $1.40), the government adds enough tax (an additional $1.60) to keep prices to the consumer at $3.00 or higher.  If the price of gasoline goes over $3.00, the tax will disappear.  I am using $3.00 as a benchmark because I think that is a tipping point where people begin to drive less and buy smaller, more efficient cars.   I also think that $3.00 gas prices is not beyond the general public’s means.  I am sure more studies could be done to determine the exact tipping point price.  Worse comes to worse, the government can adjust the floor depending on the amount of fuel-efficient cars being added to the auto population.

Carbon Tax

I still am not sure about a Carbon Tax.  I do think raising the price of all energy is not as efficient as targeting specific energy use that people can focus on improving.  A carbon tax would force businesses that do not have an easy energy adjustment solution to pay up.  As Rosenblum explains, a carbon tax would have to be phased in to allow for businesses to prepare, while a Gas Tax could be done quite quickly and adjusted for by consumers just as quickly as we saw during the moves in gas prices this year. 

In the long run, a carbon tax is probably an efficient solution.  As I said, I would be in favor of any consumption tax over any income tax raise, or in replace of any income tax.  It makes much more logical sense.  However, for short term solutions, I think a Gas Price Floor Tax would be the most logistical and efficient.

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