Cheaper Gasoline Is No Reason to Hike Taxes  

Falling gasoline prices have led to heightened interest in jacking up gasoline taxes. As a CBS story put it: “If there ever was a perfect time to raise gas taxes, now would be it. Which is why it’s no surprise that federal and state lawmakers are showing new interest.” Yet there is no economic or environmental reason that gas taxes make more sense now, compared to six months ago.

The new push for a gas tax—especially those that are explicitly sold as setting a “floor” under the price of gas—show that none of this is really about correcting a “negative externality.” It’s about forcing Americans to change their lifestyle, and putting the new shackles on while the chain initially has some slack.

Legislators and pundits who support higher taxes on carbon-intensive fuels like to pretend that they are dutifully following textbook economics and the consensus scientific view on climate change. Some groups even go so far as to label a carbon tax as a “market solution” that corrects the problem of insufficiently defined property rights. Listening to this rhetoric, one would think they aren’t trying to centrally plan energy markets, picking winners and losers. Not at all! They assure us they merely want to augment the market price of oil and other energy sources to account for the environmental damages of extra carbon dioxide emissions.

But if that’s true—if the “social cost of carbon” is a scientifically determined number of $x per ton—then these values are not significantly affected by the world price of crude oil. When gas was $3.50 a gallon, someone who thought “climate change” justified a 50-cent gas tax, should still support only a 50-cent gas tax when it falls to $2 per gallon. Under no means should someone support a “floor” where the tax adjusts to keep gas from falling below a target price.

In summary, the recent plunge in gasoline prices—which are still high by historical standards—has revealed the phoniness of many who claim to want to merely correct a market mis-pricing. No, they want to impose a tax both to achieve a certain outcome and to raise revenue for the government, which is why they now are licking their lips at the opportunity.


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