Thursday, April 28, 2005

Ezra Klein On The Undesirability Of Motivational Fuel Taxes

I've already spouted off once about why carbon taxes are regressive and wrong-headed. Now comes Ezra Klein, Liberal (at least, that's what I think his political persuasions are) into the fold with this grudging agreement of this Chris Pope piece appearing in the Daily Standard. In addition to the sawing-off-the-tree-branch-from-the-wrong-side revenue problems such a tax would create, aside from the perverse incentives it hands to the state to actually stop development of carboniferous renewable fuels, Pope adds that its influence in the UK has done little to retard car usage:
For all the promises of environmental salvation through gas taxation, car use has been limited more by the fact that roads are so jammed that people now get to places quicker by train. Yet despite the enormous popularity of cars in the face of a high gas tax, Britons still hear claims that an even higher tax is what is needed to save the environment. The fig-leaf of economic rationale has, however, fallen. With taxes accounting for such a large share of the gas price, this would imply that the benefit to society of road transportation is less than a quarter of its external cost!
But as Klein notes, an onerous fuel tax is profoundly regressive while doing little to get the most consumptive drivers -- e.g. those with Hummers -- off the roads:
The gas tax fails because it penalizes folks for conditions outside their control. We generally imagine the tax as nailing those morons peering down from Hummers, but most of the affluent, insecure drivers who're purchasing a tank for their morning commute do so fully aware that the gas bill will sting. They can take the hit. But the gas tax disproportionately hurts two other groups who don't deserve it: the poor, and the rural. The former often drive inefficient, older vehicles, and are simply less able to use them when gas prices and taxes rise. The latter don't have public transportation options and often have to go much farther to complete basic tasks, like food shopping or taking their kids to school.
Klein suggests that the answer is tacking a $3,000 fee onto new car purchases for guzzlers, while hybrids get a corresponding $3,000 rebate. I doubt such a thing could be made to work in practice, though, for the simple reason that hybrid sales are roaring skyward at a time when Ford and GM, both heavily dependent on SUV sales, have seen their bonds go to near-junk status. This is not a coincidence, and it foretells a problem that there won't be enough corresponding sales on the one side (SUVs) to balance increases in hybrid sales already present without such subsidies. Could it be that people are actually starting to pay attention, the market is doing its part to club sense into buyers (belatedly, as it turns out), and government tinkering is likely to make for a more complicated and less workable solution in not only the long run, but the short run as well?