Jim McTague‘s latest “D.C. Current” column for Barron’s suggests that an increase in the federal gas tax will likely factor into policy discussions next year — regardless of who wins the presidential election.
In this election year, neither President Barack Obama nor GOP challenger Mitt Romney dares to suggest raising the gasoline tax. But one of Romney’s top economic advisors, R. Glenn Hubbard of Columbia University, boldly raised the issue in 2010. Hubbard—who emphasizes that this is his proposal, not the candidate’s—favors a variable-rate levy to reduce U.S. dependence on oil imports and to encourage investment in alternative energy. In his book Seeds of Destruction, Hubbard proposes setting a price floor for oil, to cut domestic consumption and imports. If, say, economists determine that the ideal price of oil is $100 a barrel because it cuts imports by 10%, there would be an initial $20 “fee” when market prices fall to $80 a barrel, a $10 fee at $90, and none at $100 or higher. Hubbard insists that his plan would be revenue-neutral; he’d use any revenue it produced for tax cuts elsewhere.
Laura D’Andrea Tyson, a business professor at the University of California, Berkeley, was Clinton’s top economic advisor in 1993. She says that he favored a BTU tax as the best way to reduce oil consumption. Because so many energy-intensive industries squealed loudly, the Democratic Congress rejected the idea. Boosting the gasoline tax came up as an alternative, she recalls. Tyson suggested a levy similar to the Tsongas proposal—a non-starter. Clinton instead pushed a 4.3-cent-a-gallon hike as part of a larger revenue-raising package.
She says that “a lot of economists in the center” favor the tax because it achieves policy goals, such as encouraging purchases of fuel-efficient vehicles, while raising needed revenue.
