Friedman on a Gas Tax

http://www.futureofcapitalism.com/2011/02/friedman-on-a-gas-tax

Thomas Friedman writes in the New York Times:

The smart thing for us to do right now is to impose a $1-a-gallon gasoline tax, to be phased in at 5 cents a month beginning in 2012, with all the money going to pay down the deficit. .... With one little gasoline tax, we can make ourselves more economically and strategically secure, help sell more Chevy Volts and free ourselves to openly push for democratic values in the Middle East without worrying anymore that it will harm our oil interests.

I was against the auto industry bailout to begin with, but since when did "help sell more Chevy Volts" become justification for slapping a $1 a gallon gas tax on competing vehicles? If the Chevy Volt is so great, people should want to buy it with gas at $3.20 a gallon, without Mr. Friedman and Congress imposing a tax to bring gas up to $4.20 a gallon. The federal government is already giving purchasers of Chevy Volts a $7,500 tax credit. At a certain point, a product should have to rise or fall on its own merits, not on federal tax policy that rewards people for buying it and punishes people who buy competing products. At a certain point, it becomes less a tax preference and more, in essence, a government order to engage in certain behavior. Where's the line? Mr. Friedman backs adding a $1 a gallon gas tax on top of the already existing 18.4 cents a gallon tax, and on top of the $7,500 tax credit for electric vehicles or plug-in hybrids. Why not just go all the way and make the tax $100 a gallon and give everyone a tax credit for the full purchase price of a Chevy Volt, whatever Chevy says the price is? Or why not just ban gasoline and gasoline-powered engines altogether?

Maybe I missed it, but somehow the people of Tunisia and Egypt and now Libya are pushing for democratic values, or at least against their dictatorships, without the assistance of a $1 a gallon American gas tax. The absence of such a tax didn't seem much to restrain President Bush or even Secretary of State Clinton recently in openly pushing for more democratic values in the Middle East. Some of the undemocratic countries in the Middle East — Syria, Jordan, Yemen — don't have much oil at all, while some countries with a lot of oil, such as Canada, are democratic. A list of the world's countries by proven oil reserves is here.

As for the risk that some enemy country is going to try to hurt America by refusing to sell us oil, it's highly unlikely that such a try would work for very long, if at all. People who have oil or anything else worth a lot of money usually want to sell it. Not selling it hurts the seller as much, or more, than the buyer. If they don't sell it, the price goes up, making them even more likely to want to sell it. That rise in price would have the same effect — encouraging conservation and alternatives — as Mr. Friedman's $1 a gallon gas tax. So the "problem" eventually solves itself.

In addition, there are unintended consequences. Those Chevy Volts and other electric vehicles require energy. If it doesn't come from gasoline, it comes from somewhere else, and that somewhere else is going to have its own costs. Coal? More coal miners trapped in mines. Wind? More Chinese-made turbines and drilling in offshore waters. Solar? The "rare earths" used for solar panels and for the batteries in electric cars are mined in countries that make Saudi Arabia look like Switzerland. Hydroelectric power? Most of the wild and scenic rivers are already dammed. Nuclear? Carries its own security risks. Ethanol? Get ready for rising food prices.

I'm not saying that technological innovation won't ultimately come up with something cheaper or better than gasoline. Maybe it will. I happen to live in a city and use a car much less than most Americans, so a gas tax for deficit reduction is a plan on which I would come out ahead. But there's something about the government promoting one product over another — "sell more Chevy Volts," as Mr. Friedman puts it — that makes me uncomfortable.

by Editor  |  Feb 23, 2011 at 8:49 am Related Topics:  Auto Industry, Energy, Government ownership, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list