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A Radical Idea for Dealing with High Gas Prices
By JLP | October 16, 2007
The other day I was driving down the road and this 2007 Cadillac Escalade with a lift kit and HUGE tires passed me. It was so big it was ridiculous. Seeing it got me to thinking about how much they must spend on gas each week just to drive that thing around. Then I got to thinking that since gas prices are based on supply and demand, this particular person (and anyone else who drives big gas-guzzling trucks) is responsible for all of us paying more for gas. Yes, they have to pay more because they use more, but by them using more, they are forcing everyone else to pay more. Make sense?
So,…
What would happen if people paid a price per gallon for gas based on the size of their vehicle? In other words, someone who drives a Civic would pay $2.30 per gallon, while someone who drives an Escalade with a lift kit would pay $3.00 per gallon. The bigger the vehicle, the more you pay per gallon. I’m sure it’s not realistic since there would have to be some way of overseeing such an idea. So, implementation would definitely be an issue.
This totally goes against my free market ideals yet I can’t help but think that something like this makes sense.
What do you think? Would something like this work? If not, what’s your solution?
Topics: Miscellaneous |
October 16th, 2007 at 2:59 pm
I would have to disagree with the idea. If he/she has the money to buy whatever he/she wants to buy, it is his/her choice.
External influences should have no role in a person’s individual choices.
Cheers
RV
October 16th, 2007 at 3:08 pm
Using this model, how much more do you think groceries and other things that are transported via truck would cost?
Supply and demand are certainly part of the price equation. However I think the fact that we depend on foreign oil and refuse to spend any serious amount of money on alternate fuel technology is the bigger reason we pay what we do.
As long as we (the collective American population) keep our heads in the sand and refuse to use our own natural resources we’re stuck with what other countries dictate our fuel price will be.
October 16th, 2007 at 3:09 pm
Sorry, JLP, but I don’t think much of your idea. The enforcement bureaucracy created to police this would cost more than the supposed savings. And the loss of freedom of choice to government oversite is even worse.
If you really want to make drivers of inefficient vehicles feel the pain, then raise the gas tax. In European countries, gasoline is taxed at several dollars per gallon, rather than about 40 cents/gallon here. Additionally, diesel is given a tax break there as well. That’s why they drive small diesel cars over there.
But the problem with a gas tax is that everyone has to pay it. And apparently you just want the guy in the Sclade to feel the pain, but not you. But maybe the fellow riding a moped looks at your Buick SUV (are you still driving that?) the same way you look at Sclade. And the guy riding a bike may think that the moped rider is wasting fuel as well.
I really don’t think you want to go there.
October 16th, 2007 at 3:25 pm
I agree that the cost of implementation and enforcement outweigh anything we might save. This is the US govt we’re talking here. It would cost taxpayers several billion dollars just for them to decide on a method of calculating the weight of the vehicle to determine the gas price!
October 16th, 2007 at 3:32 pm
Interesting, but I’d still prefer a dramatic increase in gas taxes (or the institution of a carbon tax, which amounts to the same thing for gas but includes other carbon sources as well). Revenue raised thereby to be offset by increases in the Earned Income Tax Credit (gas taxes tend to be somewhat regressive; raising the EITC would help offset that) and (possibly) decreases in income-tax rates or increases in deductions and tax credits. Revenue-neutral and fairly easy to administer.
Increased gas costs will incent people to by smaller and more fuel-efficient cars and make alternative transportation options more attractive. It’s a fairly standard economic case of trying to align the true costs of consumption (releasing carbon and pollution) with the marginal costs thereof. And it lets the market find efficient solutions, rather than relying on legal mandates, which often result in inefficient ones.
I wouldn’t mind if a small portion of increased revenues were funneled through the NSF toward research in alternative energy sources, but the incentives created by increased fuel prices would probably provide significant motivation for private research and make alternative sources attractive on their own without subsidies.
I’m pretty much just guessing, but I’d think a $2/gal tax (or the equivalent carbon tax of $.82/kg) would have a significant motivational effect. We could step it in over 4-8 years if we want to spread out the impacts and give people time to change cars on a normal upgrade cycle.
It’s been proposed by plenty of people and it’ll never happen, but it’s nice to imagine.
October 16th, 2007 at 3:35 pm
Great idea but it just wouldn’t work (and you probably wouldn’t want it to work, either).People(and the government) have to really and seriously start looking at energy conservation. Encourage small diesels that get 50+ MPG and not the Prius that gets 30+ in the real world. Stop putting hybrid engines in Tahoes (Yup) so they can get 14 MPG. Stop encouraging corn ethanol when there are better alternatives. But the real bottom line is look at what energy you are consuming and whether there’s a better way. If somebody REALLY REALLY has to have an Escalade or a Lincoln Town Truck, reinstate the gas guzzler tax - there was one a few years back.
A number of years ago, I worked in Iran for THE Oil Company. Do you know what it cost to produce a barrel (42 gallons) of oil lo those many years ago? The answer - 11 cents!!!!!!!!!! - not $11 but 11 cents. So, we are being taxed when we consume foreign oil - big time.
October 16th, 2007 at 3:45 pm
Good points, all of them. Like I said, it’s radical (but not necessarily good). In reality it would be an expensive nightmare trying to keep it all straight.
I guess I just don’t like the idea of the general public subsidizing those who drive really big vehicles.
October 16th, 2007 at 3:45 pm
Mr. Escalade is already paying a penalty … I’m guessing 1-1/2 to 2 fill-ups every 10 days, about $90. I don’t think much of a higher price based on vehicle size. I do think the feds should get off their ass and do everything possible to develop alternative fuels, for vehicles and for energy production. We really need a “Manhattan Project” to tackle this problem. It will be a good day when we can tell OPEC to stuff it …
October 16th, 2007 at 3:52 pm
Slightly OT: This reminded me of the situation in Oregon. There is a large concentration of environmentally conscious people in that state. They are (generally of course) driving more and more fuel-efficient cars. Well, this has finally significantly impacted gas tax revenues (they will start to drop in 2014 given trends). So now the gubment wants to change the gas tax to a mileage tax. So a commuter driving a fuel-efficient vehicle 15 miles (and using 1/3 of a gallon of gas) would pay more than a gas guzzling SUV driving 10 miles (and using a full gallon of gas). And a transmitting GPS in every car…
http://seattletimes.nwsource.com/html/localnews/2001972174_mileagetax05m.html
October 16th, 2007 at 3:56 pm
While I would love to see it happen, it isn’t practical nor very American.
I’d just like to see people who drive large vehicles of any type have to take a separate test and get a special license/permit to operate their vehicle. You need to get a special license to drive a motorcycle, and not anyone can hop into a commercial truck, yet you have people who aren’t even fit to drive a civic hatchback barreling down the freeway in a small tank.
Maybe the extra step needed to get behind the wheel of something so large would be enough of a deterrent. Of course, you can’t fix stupid, so I think I’ll have to settle for putting my life on the line every day as idiots drive around as if they are invincible.
October 16th, 2007 at 3:59 pm
Jeremy,
That’s almost as bad as people driving those really huge RVs! Those things are scary and yet they don’t have to have a special license to drive one. Makes no sense to me.
October 16th, 2007 at 3:59 pm
Trip,
LOL! That’s really sad!
October 16th, 2007 at 4:04 pm
“This totally goes against my free market ideals …”
Yes, it most certainly violates free market principles.
Sounds like you really don’t understand and/or accept those principles.
____
“The free market has an annoying habit of producing goods that people actually desire and want to consume.”
(– Paul Cantor)
October 16th, 2007 at 4:06 pm
ChrisW,
Yes, I understand capitalism.
October 16th, 2007 at 4:08 pm
my tip on gas prices is train your mind to think anything under $5 per gallon is a bargain.
October 16th, 2007 at 4:09 pm
While I appreciate your enthusiasm I disagree. Your assumption is that people who drive large vehicles are automatically using more gasoline and that is not necessarily true. I drive a Toyota Land Cruiser and usually drive about 7500 - 8000 miles per year. For exercise I ride a bike and run. I have friends who drive significantly smaller, more efficient automobiles who drive three and four times as many miles as I do.
Who is using more gasoline in this case? And even if we figure that one out, why should they be penalized? Let’s let the markets wring out these issues and not big brother.
October 16th, 2007 at 4:15 pm
I have to agree with the other commentators … hard to enforce and we will find many small car owners sell second hand gasoline on the street
October 16th, 2007 at 4:22 pm
The large increase in the price of gas in the late 70’s resulted, over a period of several years in a significant reduction of overall demand which in time reduced the price of gas significantly in real terms.
I’ll speculate that a large tax on gasoline (>$2 per gallon and adjusted for inflation) would, over time, reduce demand significantly, thus bringing down the price of gas to closer to what it is (was) before the tax.
Of course the lower price would increase demand . . . . . .
October 16th, 2007 at 5:25 pm
Being that I drive a Civic, I think it’s a fantastic idea!
It does make a lot of sense though too! Good thought!
October 16th, 2007 at 6:00 pm
I lived in England for a couple years, and there is an annual Road Tax assigned to every vehicle over there. Those with smaller engines (based on cc’s) pay less Road Tax. While this isn’t a gasoline tax, it is a tax based on the size of your vehicle, and is similar to what you are hinting at. However, the tax is a one time annual fee, and it really isn’t that bad to begin with. I don’t remember the exact amount, but I think it was around a hundred Pounds or so for the largest engine. In the US though, this would probably be a state level tax if something similar ever came about.
October 16th, 2007 at 6:05 pm
Like Tom says, tax gas uniformly instead. The tax could simply represent the true cost of gas and road maintenance - including protecting gas fields in the middle east, making nice with despots so we can get their gas, the cost of pollution, etc…
Without the externalities, the market will take care of the problem itself.
October 16th, 2007 at 6:08 pm
Also, the last time I checked, there were actually tax DISCOUNTS for buying big SUVs. I think the behemoths had to be associated with a business, no matter the type. Do those still exist?
October 16th, 2007 at 6:15 pm
The question is, then, is it “American” and “free market” to be completely selfish and unconcerned with the consequences of one’s actions? And if so, is “American” the right way to be?
Why not just give rich people carte blanche to break all laws and do whatever they want as long as they can pay for it? Where does the government draw the line?
Part of the American governmental system is designed to protect us from each other. Even small government types tend to think that. So people who murder, rape, and steal go to jail. So I’m being dramatic, but here’s something else to consider: people who drive at unsafe speed pay fines.
The question is just whether the behaviors of people driving gas guzzling cars are hurting others. If so, then the government can fine them through taxes. If not, then I guess not.
You have made the argument, JLP, that their behaviors do hurt the rest of us. If the government agrees with you at some point, perhaps something like this will go through.
October 16th, 2007 at 7:59 pm
I don’t think it would work because of what it would take to determine the price by vehicle type rather than supply and demand of the commodity itself. Anyway, who is to say the large vehicle driver may only be driving a few miles per week - while the small vehicle driver may be driving hundreds of miles per week? All these types of factors would make it difficult to determine price by vehicle type.
October 16th, 2007 at 9:01 pm
why? they already pay more than the smaller car because they use more gas. what about hybrid SUVs? Why should people who NEED a larger car be punished?
I cant drive a civic to work, I need my SUV to carry around equipment. My dad would love to drive his motor cycle to work every day but the 500+ lbs of tools he needs wouldn’t fit. and i’m sure my step-dad would love a nice BMW but probably couldn’t tow his back-hoe with it.
October 16th, 2007 at 9:10 pm
lorax: I believe so. This is part of the reason you see so many doctors, lawyers, etc. (most of whom are technically self-employed) driving monster vehicles. The idea was to give tax breaks on work trucks to people who need them for work (farmers, contractors, etc.) but our brilliant leaders left a huge loophole.
October 16th, 2007 at 9:15 pm
You’re overthinking it. It isn’t the size of a car that matters, it is the amount of gas that it uses that is the thing. Fortunately cars that require more gasoline already cost more to fill up, so it balances perfectly and we already achieve what you want.
Now, you could argue that the price of gasoline doesn’t accurately reflect the true cost (because it is really only the cost of production and delivery). The cost of pollution is not a factor in the price for example. The reasonable way to incorporate the “cost to everyone” is for “everyone” to assess a fee, i.e. more gasoline tax.
That is the conclusion of the thought experiment. If you feel like wasteful people should pay more, you want higher gasoline taxes.
October 16th, 2007 at 9:15 pm
1) Raise the gas tax.
2) Outlaw all non-cash forms of gasoline payment (ie, NO charge cards or anything that can be dismissed in bankruptcy proceedings).
3) Make sure you carry a gun to the gas station in order to shoot anyone who will rob you for gas money.
October 16th, 2007 at 9:21 pm
[...] AllFinancialMatters has a radical idea to deal with the soaring gas price. Cool idea, JLP, though it will never work. [...]
October 16th, 2007 at 9:44 pm
Here in Virginia, the annual vehicle property tax is based in large part on vehicle weight. This works because heavier vehicles put more stress on the roads.
October 17th, 2007 at 6:48 am
On a similar subject, check out what is being floated about as an idea for gas taxes: http://www.usatoday.com/news/nation/2007-09-20-roads_N.htm
The idea is that with fuel efficiency going up, gas tax revenues are going down so this forces people to pay by the number of miles they drive, not gas they use. My problem here is that it doesn’t encourage fuel efficiency. If gas tax revenues are falling, the time has come to increase the taxes (some haven’t gone up in 20+ years).
Regarding your idea - it is very similar to our government’s graduated income tax. I happen to like the idea. All you would have to do is install scales at the pumps and the weight of your vehicle would be registered. People hauling more stuff (long distance) would pay more, too.
October 17th, 2007 at 6:57 am
Here’s something not suggested so far: privatize the roads.
After all, the roads themselves are a HUGE part of the equation, and should be a major part of the cost of driving.
Think about it. All this land was more-or-less stolen in the first place at well-below the real market cost. Now it is being held tax-free (and without having to compete against alternative uses) in order that jokers in Escalades can zoom up and down it at will.
Private, subscription/use-based roads would also be a way of letting the market decide how to deal with polluters and, by extension, owners of high-emissions vehicles.
October 17th, 2007 at 7:43 am
JLP,
I love your idea. But I’m a Republican.
October 17th, 2007 at 1:47 pm
I like it but it would never happen. A better way would be to make everyone pay more for gas…a big gas tax increase would probably be the only way to get people’s heads of the collective sand.
October 17th, 2007 at 5:48 pm
The price of gas must stay low if we want the economy to continue to do well. Beware of the party that clams to want to help the poor but keeps coming up with new tax ideas to hurt them. The latest Clinton idea would add $0.50 a gallon to the price of gas. Making it harder for the poor to get to work and buy food and other things that would increase with transportation cost.
October 17th, 2007 at 10:33 pm
What about rationing, you economists out there…
October 19th, 2007 at 5:19 am
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October 20th, 2007 at 8:34 am
It’s almost ironic that fuel-efficient cars usually cost less than the gas-guzzler SUVs. But if you take the typical example, the Civic driver already pays less in taxes than the Escalade driver through the sales tax. In some states, there is a tax on the value of the vehicle each year, which would also generally prove lower for the Civic driver.
So if you’re adding an inefficiency tax to Escalade usage, consider that it’s usually a higher-taxed car already.