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The Case for Higher Gas Taxes (and Lower Income Taxes)
Robert Rapier, The Oil Drum
… The same logic [about taxes on optional purchases] holds for certain other consumption taxes, such as gasoline taxes. I can choose to use less, and the higher the price, the greater my incentive to make that choice. If the price is low, so is the incentive to conserve.
I think most can agree that in the U.S., a lot of gasoline usage is discretionary. We don’t treat our fossil fuel endowment as something that our children and grandchildren might need. We seem to be content to burn through it and keep our fingers crossed that there is a solution right around the corner for future generations. This is exactly the sort of “spend now, pay later” mentality that has gotten us into such a financial mess.
But what if you knew that there was a solution just around the corner for our fossil fuel dependence? What if you knew that unless we scale back consumption, your children and grandchildren will have to make far greater sacrifices? I think I speak for most parents when I say that I am willing to voluntarily sacrifice if it enhances the odds that my kids will have a brighter future.
This forms the basis of my support for higher gasoline taxes. In my opinion, a small sacrifice today will stretch our fossil fuel endowment and buy more time for sustainable alternatives to emerge. The advantages of having a higher gasoline tax, or more generally a fossil fuel tax, would be many in my opinion. They include:
- It would lead to conservation, which would help preserve our remaining fossil fuel endowment.
- It would encourage mass transit (people flocked to mass transit this year as prices climbed).
- It would make alternative energy candidates more competitive with fossil fuels, without picking specific technology winners.
- It would enable people to do a better job of planning ahead, as opposed to the constant expectation that low gas prices are right around the corner.
- It should encourage more efficient city planning, and rein in some of the suburban sprawl.
- It would make the price of fossil fuels more reflective of the negative externalities that are not currently priced in (air pollution, military expenditures, etc.).
- It would penalize alternative energy sources with low energy returns, and reward those processes that minimize fossil fuel inputs.
(15 December 2008)
Makes sense to me. It’s not a cure-all, but it’s a step in the right direction. The rest of Robert’s column argues that gas taxes should be revenue neutral (for example, by decreasing income taxes). In the comments, jubilado makes an excellent point:
I think that the idea of an energy tax would be more palatable to people if it were approached in a slightly different way. Instead of saying “I propose that we create a tax on energy (gasoline?) and offset it by reducing the income tax.”, say “I propose eliminating the income tax and replacing it with an energy tax to fund government.” That way, those who only hear the first part of the message wouldn’t be immediately turned off.
. The article also appears at ASPO-USA. -BA
The Remedist (Keynes is back)
Robert Skidelsky, New York Times
Among the most astonishing statements to be made by any policymaker in recent years was Alan Greenspan’s admission this autumn that the regime of deregulation he oversaw as chairman of the Federal Reserve was based on a “flaw”: he had overestimated the ability of a free market to self-correct and had missed the self-destructive power of deregulated mortgage lending. The “whole intellectual edifice,” he said, “collapsed in the summer of last year.”
… This is where the great economist John Maynard Keynes (1883-1946) comes in. Today, Keynes is justly enjoying a comeback. For the same “intellectual edifice” that Greenspan said has now collapsed was what supported the laissez-faire policies Keynes quarreled with in his times. Then, as now, economists believed that all uncertainty could be reduced to measurable risk. So asset prices always reflected fundamentals, and unregulated markets would in general be very stable.
By contrast, Keynes created an economics whose starting point was that not all future events could be reduced to measurable risk. There was a residue of genuine uncertainty, and this made disaster an ever-present possibility, not a once-in-a-lifetime “shock.” Investment was more an act of faith than a scientific calculation of probabilities. And in this fact lay the possibility of huge systemic mistakes.
The basic question Keynes asked was: How do rational people behave under conditions of uncertainty? The answer he gave was profound and extends far beyond economics. People fall back on “conventions,” which give them the assurance that they are doing the right thing. The chief of these are the assumptions that the future will be like the past (witness all the financial models that assumed housing prices wouldn’t fall) and that current prices correctly sum up “future prospects.” Above all, we run with the crowd.
(12 December 2008)
Redesigning Money Systems to Reduce Greenhouse Gas Emissions
Hazel Henderson, Culture Change
CC Editor’s note: Hazel Henderson is the celebrated, longest running alternative economist. A reader of Culture Change, she endorsed our Alliance for a Paving Moratorium in the 1990s. She famously observed that “Economics is a form of brain damage.” Hazel supports “accelerating the growing green economy” and “ethical markets.” This may conflict with a vision of sustainability based on simplicity, but this article provides timely insights on financial politics.
Here’s some important advice from Hazel for the Obama transition:
Unfortunately, President-elect Obama has too many special-interest, tainted economic advisors. He needs to fire Robert Rubin (“Mr. Leverage,” former Goldman-Sachs chief and now presiding over the demise of Citibank and its billions of toxic “assets”); Larry Summers, former Treasury Secretary, who together with Rubin blocked lawyer Brooksley E. Born, head of the Commodity Futures Trading Commission, from regulating credit default swaps. She testified before Congress in the late 1990s that they could blow up the global financial system. Summers, Rubin and Alan Greenspan severely criticized Born, and she resigned.
Why listen to Hazel? Here’s a hot historic fact:
The Bank of Sweden Prize in economics (was) pushed on the Nobel committee in the 1960s to trump opposition and legitimize the discipline and profession of economics as a “science.” Economists are still trying to use this phoney “ Nobel” prize to justify why central bankers should be free of political oversight — even in democratic societies. The truth that economics was never a science is now revealed.
Hazel Henderson’s faith in “information-rich societies” may or may not typify our modern fascination with knowledge rather than wisdom, whereby our command over information and data blinds us to what we’ve lost in traditions of sustainability. Of greater certainty in our critiques is that a single “green economy” may be a contradiction in terms. World trade may not be green at all, unless it is based on sail boats using just wind. At any rate, this article is a glimpse of the global green economics movement’s intentions and dreams.
The following report is in support of her video presentation to the Green Economy Initiative Conference, United Nations Environment Programme, Geneva, Dec. 1, 2008. (“See visuals” must be ignored for this webpage.) – JL
• The financial crisis of 2008 presents the best opportunity in over a century to simultaneously reform money systems and create additional mediums of exchange and financing mechanisms to accelerate the shift from the fossil-fuel/nuclear-Industrial Era to the greener information-rich Solar Age. Today’s convergence of global warming, financial crisis and the growing green economy signify a new stage in human awareness and understanding of our place in Nature and are fueling the needed paradigm shift to the Solar Age (The Politics of the Solar Age, Hazel Henderson, Doubleday, 1981).
• Today, all of the proposals for reform of central banking, the history of money and alternative currencies, together with suppressed contemporary work on local currencies, barter and electronic trading systems, as well as ecological economics, such as the global TEEB (The Economics of Eco systems and Biodiversity) study are coming to the fore. Such outside-the-box approaches are now essential (see attached Bibliography).
(13 December 2008)
