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New York Times: Raise the Gasoline Tax?  Funny, It doesn't sound Republican

Mr. Greenspan was hardly a proponent of raising taxes on energy to encourage conservation, a policy prescription generally associated with the politicians and economists of the left.

Until now. In late September, as he spoke to a group of business executives in Massachusetts, a question was posed as to whether he'd like to see an increase in the federal gasoline tax, which has stood at 18.4 cents a gallon since 1993. "Yes, I would," Mr. Greenspan responded with atypical clarity. "That's the way to get consumption down. It's a national security issue."

...

N. Gregory Mankiw, the Harvard economist who served as chairman of President Bush's Council of Economic Advisers from 2003 to 2005, favored a higher gas tax before going to Washington, and has been banging the drum loudly for it since he left.

...

The roster of what Mr. Mankiw calls "economists and pundits with the good sense to have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes," includes some of the usual suspects --  Paul Krugman, a columnist for The New York Times, and Al Gore, for example -- as well as unusual suspects like Gary S. Becker, the economics professor and Nobel laureate at the University of Chicago.

Andrew A. Samwick, chief economist on the Council of Economic Advisers from July 2003 to June 2004, and a professor of economics at Dartmouth, is a member in good standing. So is Martin S. Feldstein, the intellectual godfather of a generation of Republican economists.

...

But as much as Republican-leaning economists like Messrs. Greenspan, Mankiw and Samwick may think that it's a good idea, the Republican politicians who control the levers of power in Washington think that it's an awfully bad one, even though gas taxes in the United States are far lower than those in other industrialized countries.

...

... because President Bush and his top political advisers are known to be adamantly opposed to any increase in the gas tax, economic advisers haven't pushed it much. ...

THIS highlights a professional hazard faced by academic economists who serve in presidential administrations. They must act as team players who value the overall success of the administration -- even if they don't agree with all of its policies. As a result, economists must often stow some of their policy ideas in an intellectual coat check at the White House gates, where they can be reclaimed upon return to private life.

Or did anyone slip these guys a copy of Energize America?

Truth unfolds in time through a communal process.

by marco on Sun Oct 8th, 2006 at 12:51:17 AM EST
[ Parent ]
A significant difference between the U.S. and most other countries is that our fuel taxes are mostly usee for transportation-related projects, like roads. Gasoline tax doesn't go into the general fund here like it does in Europe...
by asdf on Sun Oct 8th, 2006 at 01:12:15 AM EST
[ Parent ]
I haven't bought gasoline in the UK since I left 15 years ago.  (generally don't hire/rent a car when I visit)  I'm surprised the tax is that high--$4.24.  What's the price of gasoline today in the UK?  Must be incredible if that is the tax.
by wchurchill on Sun Oct 8th, 2006 at 02:11:07 AM EST
[ Parent ]
85p-90p/litre, depending on location
by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Oct 8th, 2006 at 04:28:38 AM EST
[ Parent ]
I believe prices are hovering just under the psychological barrier of £1/l and just over €1/l.

$4.24/gal(US) is $1.12/l or £0.60/l.

So, 2/3 of the price of fuel in the UK is tax.

$1/l = $3.79/gal(US)
€1/l = $4.77/gal(US)
£1/l = $7.08/gal(US)

as of today.

Wikipedia: Gasoline usage and pricing:

Norway (Oslo): $7.68/gal on August 8, 2006
UK: $5.58/gal on September 29, 2006
Germany: $5.29/gal on September 29, 2006
US: $2.38/gal on September 25, 2006
Venezuela (Caracas): $0.14/gal on September 29, 2006


Those whom the Gods wish to destroy They first make mad. -- Euripides
by Migeru (migeru at eurotrib dot com) on Sun Oct 8th, 2006 at 05:07:08 AM EST
[ Parent ]
Prices have been dropping for the last few months. They peaked at around £1/litre in July/August and have been on the way down ever since.

Pump prices follow crude prices almost instantly when crude goes up, but then come down only very slowly.

Usually what happens is one of supermarkets breaks ranks to score some quick cross-over interest, and the others have to follow.

Independent forecourts set their own prices, and they're usually even higher.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Oct 8th, 2006 at 05:40:44 AM EST
[ Parent ]
Prices and price dynamics in Finland are around the same. A quid a liter is about 1,44 €, whereas here it is now around 1.3 €. I assume the tax levels explain the difference.

You can't be me, I'm taken
by Sven Triloqvist on Sun Oct 8th, 2006 at 05:53:51 AM EST
[ Parent ]
I wish the US had been smart enough to begin raising taxes, and thus prices, in the '70's.  We would have a lot different vehicle profile today if we had.
by wchurchill on Sun Oct 8th, 2006 at 03:11:14 PM EST
[ Parent ]
Look what happened to Carter.

Those whom the Gods wish to destroy They first make mad. -- Euripides
by Migeru (migeru at eurotrib dot com) on Sun Oct 8th, 2006 at 06:42:19 PM EST
[ Parent ]
Thanks - that will be my story of the day...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sun Oct 8th, 2006 at 04:11:26 AM EST
[ Parent ]
Isn't it a no-brainer for administrations? Demand reduction coupled with increased tax revenues. Hello?

Oh but of course, if you are a dyed in the wool tax cutter....

I will be interested to see if those countries with high fuel taxes start to manipulate the tax when base fuel costs rise painfully. When transport costs start to impact the economic viability of major employment providers, it may make sense to forego some of the revenue (which has been rising anyway)

If, however, you have a low tax component, it doesn't give you much room to manoeuvre eg in the States.

You can't be me, I'm taken

by Sven Triloqvist on Sun Oct 8th, 2006 at 06:03:37 AM EST
[ Parent ]
People have been demanding that European governments reduce fuel taxes to protect drivers from oil price increases.

That is emphatically the wrong policy - this is a genuine market signal (even if there is manipulation of market volatility the base price is genuine) and masking them would only make matters worse in the long term.

Those whom the Gods wish to destroy They first make mad. -- Euripides

by Migeru (migeru at eurotrib dot com) on Sun Oct 8th, 2006 at 06:10:35 AM EST
[ Parent ]
I agree.

Tax manipulation does however have a short term use in stabilising costs for both corporates and homes. It cannot change the long term need for demand reduction/alternative energy needs, but could assist in the transition.

You can't be me, I'm taken

by Sven Triloqvist on Sun Oct 8th, 2006 at 06:19:40 AM EST
[ Parent ]
I don't agree.

The problem is that you can't tax people off car use if you don't give them an alternative. If there is no alternative, they'll simply pay more. This may raise revenue in the short term, but it also has the effect of introducing a rather random car-use tax with random social effects.

While you'll catch the gas guzzlers with this, some people who have to use cars - for example nurses, especially in rural areas - will be unfairly penalised.

A petrol tax only makes sense as part of a wider social transport strategy. Otherwise it's an example of believing in marketism, and the mistaken notion that if you can link a single variable to a single policy factor the wider social effects don't need to be thought through because the invisible hand will magically solve the problem for you.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Oct 8th, 2006 at 12:54:41 PM EST
[ Parent ]
If you want to protect rural nurses, pay them more. If you reduce fuel taxes you reward fuel consumption.

Those whom the Gods wish to destroy They first make mad. -- Euripides
by Migeru (migeru at eurotrib dot com) on Sun Oct 8th, 2006 at 01:51:33 PM EST
[ Parent ]
The fuel tax in Norway has actually been decreased somewhat over the last couple of years, to shield the politicians from getting booted out in the prior elections.
by Trond Ove on Sun Oct 8th, 2006 at 11:43:23 AM EST
[ Parent ]

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