With Gas At $4/gallon, Democrats Propose Gas Tax Increase

Posted by Casey
July 23, 2008

Even in these days of $4+/gallon gasoline, some Democrats are floating the idea of raising the gas tax.

http://www.msnbc.msn.com/id/25751775/

The decline in gas tax revenue is actually a victim of market conditions. The higher prices have decreased demand for gasoline, causing fewer gallons to be sold. Since the gas tax is static and is not defined as a percentage of the price, fewer gallons sold = less gas tax revenue.

So, Democrats go with their true blue tactic of raising taxes to try to raise revenue when, in fact, this would have the opposite effect. Doubling the gas tax would only serve to increase the price of gas and decrease demand even more, and they would just have to raise the gas tax again, and so on and so forth.

Adding to this is that the cost of road construction has skyrocketed due to the cost of oil byproducts that form the adhesive base of asphalt pavement.

The only accurate solution to these problems is increasing the sale of oil. That will only happen if prices fall. And prices aren’t going to fall without some help.

I don’t buy the Republican argument that the price of gas is caused solely by a lack of supply.

I also don’t buy the Democrat argument that the price of gas is caused by greedy oil company executives and hedge fund managers.

I think it is a combination of many factors:

  • Lack of our own strong oil supply
  • Rampant speculation by hedge fund managers looking for a safe haven for funds after the tech bubble collapse
  • The rapid decline in the value of the dollar and the excessive inflation caused by the Federal Reserve’s policies of influencing interest rates to fall by printing more money.
  • 3rd world government subsidies for intra-state oil sales in the middle east, Asia, and South America
  • Worst of all, government mandates for “cleaner” gasoline that only serve to diminish the efficiency of gasoline, and the corn-based ethanol and hybrid vehicle fallacies.

    • All of this can be fixed by adopting the right policies in Washington:

  • Replacing our reliance on foreign oil with a supply of domestic oil
  • Reigning in speculation by ensuring that anyone buying an oil contract has the facilities to store and sell the oil they’ve contracted for
  • Mounting an aggressive campaign to switch to hydrogen combustion engines for all vehicles, starting with the civilian government and military, on to consumer vehicles and industrial machines
  • Replacing heating oil in northern states with electric heat
  • A return to the Gold Standard and the backing of the dollar with precious metals and removal of the Federal Reserve System
  • Last but certainly not least, passing the FairTax and creating a favorable business environment for domestic production of goods, thereby reducing the demand for oil for transporting those goods

    • Only after these measures are taken will the energy crisis be over.

    Economics, Government, Taxes

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    Comments
    Comment by D Wright on July 23, 2008 @ 11:11 am

    Doesn’t it take more energy to make Hydrogen than it’s worth?

    Comment by Oli on July 23, 2008 @ 11:59 am

    I think your beginning conclusion is incorrect. Doubling tax will (theoretically) only half sales if it’s currently 50% of the price. I think you’d find it would be a lot less than that because people are already running near their bare minimum fuel requirements.

    Adding tax at the moment doesn’t seem like a great idea, though. They’ll get more money but they’d face bankrupting the most stretched portion of society.

    I wouldn’t write off either Republican or Democrat argument for showing why the price is so high, though. I think both are at least partially correct. There is more demand and marginally less supply. Oil companies are all filing record profits (explain that one) and investors are very much responsible for market prices.

    “Reigning in speculation”! A Republican suggesting *more* regulation!? Pigs might fly, yet!

    I’ve got to agree slightly there. I’ve been thinking over the past few months that perhaps essential commodities shouldn’t be market-saleable at all, rather they should have centrally set prices.

    I’m not just talking about oil. Commodities futures on rice are literally causing famine. Traders are actually going to kill people to make a bit of money. Capitalism rules at times.

    Comment by Casey on July 23, 2008 @ 12:27 pm

    I’m not necessarily a “Republican.” I’m more of a Libertarian-Republican, but I understand the need for regulation of global/national commodities markets.

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