Offering frequent news and analysis from the majestic Evergreen State and beyond, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Thursday, June 22, 2006

Gas prices work

We may have this object lesson in front of us for years to come, but I want to point out again that high gasoline prices are redesigning America's passenger car fleet, and are the impetus for a major boost in ethanol production. We posted on the improved use of the HOV lanes.

The unacceptable problem is that the proceeds of high prices are going to Big Oil. That needs to change. An immediate progressive tax on the price above $2 needs to be instituted, a tax that ensures gasoline remains high in price, but revenues return to the public good. So long as prices remain high, a host of good ideas will be brought to market. But if investors were certain that fluctuations wouldn't wipe them out, even more would be forthcoming. A great idea with gas prices at $2.50 can be a bust if they fall to $2.25.

The state is in the absurd position of having high prices hurt -- yes, hurt -- gas tax revenues. Why? because the gas tax is an excise by the gallon, not by the dollar. When prices go up, consumption goes down.

A progressive tax at the federal level could be immediately returned to the taxpayers in the form of reduced withholding rates, or even payroll tax rates. The object is not to increase revenue, the object is to put gas prices at a level that relates at least remotely to their costs.

Right now, the price of gasoline accounts for only three things: The cost of production and distribution, the cost of roads (through the gas tax, and profits to oil companies and cartels. Totally absent from the equation is the immense environmental calamity we are facing, the geopolitical catastrophe we've created in search of future supplies of oil (see Iraq, Nigeria, Venezuela, Saudi Arabia, etc.), and the many of the elements of sprawl. It is a total market failure that these costs are not included in the price.

The Europeans are decades ahead of us on this. Keep the high prices, but lose the corporate profiteering.

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