First the Gulf Coast Oil Spill, Next the Gas Tax?

By Derek Thompson

The oil gush in the Gulf Coast could take weeks to plug and months to clean up, according to administration officials. But what could the political ramifications be? Some people expect Obama to slowly walk back his March plan to expand offshore oil drilling, which was seen as a public relations move to tack center before energy legislation dominates the headlines. The Economist's Ryan Avent says the spill underlines the need for a gas tax to move Americans off oil:*

What would do some good would be an effort to limit oil demand, and the most direct way to accomplish that is to tax the stuff. America notably has one of the lowest national petrol tax rates of any developed nation. The rate was last increased in 1993, and its value has eroded significantly since then, in real terms and relative to the market price of oil. It's an absurd state of affairs given America's dependence on oil.

Obviously, these problems are all linked. Heavy oil dependence makes petrol tax increases extremely unpopular.

Because this cycle is difficult to break, America seems to wait, perpetually, for events that might unite politicians behind a banner of shared sacrifice and give them the courage to do the right thing--raise the petrol tax steadily over a period of years.

Lots of good thinking here. But also, some pretty rotten timing. If this oil spill had come in three years with unemployment closer to 5% than 10%, maybe some politicians would be willing to use the catastrophe as a fulcrum for a gas tax. But try talking about new taxes in this environment, when zero-tax Republicans actually have a point about not wanting to burden Americans with new federal taxes over rising state levies. Today even the president's campaign promise to let the Bush tax cuts expire for families making more than $250,000 is the subject of CNBC kvetching and accusations of wealth destruction and wailing along the lines of "but not in these economic times!"

You could make the gas tax revenue-neutral -- even slightly progressive -- by cutting Social Security taxes or federal income taxes, and a stronger price on the negative externalities of our oil addiction could reduce car emissions, encourage alternative transportation, and move us to generate more of our energy in the United States. But don't expect the president to use the oil spill as a news peg for a new tax he's barely mentioned.

*Update: Here's where the US gas tax stands today, via the Economist. It's among the lowest of any developed country.

 


This article available online at:

http://www.theatlantic.com/business/archive/2010/05/first-the-gulf-coast-oil-spill-next-the-gas-tax/39827/