I understand concerns about the government’s ability both to set appropriate tax rates and use revenues in a manner that benefits everybody. I would only say, in defense of my numbers, that these figures aren’t totally ambiguous and their magnitude is of course up for debate. Anyway, as this is near the end of the current page and I have just finished my semester (yes I am a pain in the ass, know it all college student), I’ll leave it at that.

If you are interested in some of the literature on gasoline taxes check our parry and small efficient gas tax (free on google).

Particularly, when I see European road tax plans ( http://www.st-andrews.ac.uk/visiting/Travelplan/sustainabledriving/) that would cost $53/year for fuel efficient cars up to $450/year for guzzlers, I dont understand why my 2001 Malibu (still getting 28mpg) should cost me $800-$900 a year in tax. Whatever reason the government wants that amount of money from me, it isn’t because of my environmental imapct.

BTW – I’ve been following the RH and “L” gas tax debate in this thread with interest. I have not weighed in because I have not really made up my mind on this. I do think there is a libertarian case to be made for polluters to pay the full price of their environmental damage, and that would include my high speed, low mileage, CO2 spewing Shelby coastal run. It does seem that some sort of gas tax would be reasonable mechanism for that. But – I have not thought it through. Anyway, its food for thought.

Specifically to farmers, think about it, if gasoline prices increase then they pay more for operations on their farm that deal specifically with the burning of gasoline. In terms of other environmental damage, well, the same principle can be used to tax the externalities of farm production. What I am talking about is a Pigouvian tax, you can look it up if you are interested.

Also, the nice thing about taxing economic “bads” is that we can untax economic “goods” (i.e. income, capital gains) and the result could theoretically be revenue neutral.

Also, in your model, when do farmers pay for the other damage they do before they ever ship their product to market?

Using my logic, agriculture would pay for the damage it does because of the tax on gasoline. That works out perfectly doesn’t it? I don’t see how my logic would cause these practices to discontinue, just pay for the damage they do. (Oh, and I just used the concrete environment example, there are other externalities).

So, I never threw out any numbers but since you decided to maybe I can go along. Your example implies that the total tax on gasoline would be $4 or $5 a gallon. I never argued for a $4 or $5 tax per gallon of gasoline. Most models I have seen advocated for a $1 per gallon gasoline tax increase, which including current and federal state gasoline taxes would come to $1.40. You can do all the calculations over again if you want, it is the principle behind the tax not the numbers I care about.

With regards to market rates and a punitive tax. As I noted, gasoline is not a commodity like wheat (where few or no externalities exist). When you burn a gallon of gasoline, you put some amount of pollution into the air that society, collectively, pays the cost of and you will pay only a fraction of the cost.

So driving 30 miles in my Malibu does $4 or $5 dollars worth of harm to the environment?

Oh, c’mon.

And there are plenty of people who argue modern agricultural practices (use of fossil fuel burning equipment, use of petro-chemically dervived fertilizers and pesticides, use of diesel burning trucks to ship food hundred/thousands of miles, etc.) have “negative externalities”. So, using your logic, how could we possibly allow such practices to continue? I mean, according to your model my driving 240 miles a week should result in my doing $1600 worth of damage to the enviornment during the course of year. That comes to about 13 cents for every mile I drive. Well, a diesel truck is more polluting, so lets say they cause 20 cents worth of environmental damage per mile. According to the Feds Trucks travelled 1.1 trillion miles in 2005, so at 20 cents a mile that would come to: $220 Billion dollars a year every year….

Sorry. Don’t buy it for a second.

Scott, if you guys come out with one of these, you’ll have a convert. ;)

Also agreed on Chrysler. If they’re not actually concerned about their product, then I’m not concerned to give them my money.

The low cost of food and variety is not outweighed by congestion, security concerns and environmental damage, but if the transportation of it contributes to these three things then it does cost too little. Instituting a gas tax would not eliminate the variety and low cost of our food, it may make it more expensive, but once again, it would be priced at its true value. So, food shipments would not stop (as you seem to imply), food would just become marginally more expensive….and there may be benefits to that, but that is another subject.

It is true that you would have to work pretty hard to get Americans to agree to this tax. That’s probably why neither party has attempted to increase the gas tax even though advisers, both to Democrats and Republicans, would argue for it.

With regards to market rates and a punitive tax. As I noted, gasoline is not a commodity like wheat (where few or no externalities exist). When you burn a gallon of gasoline, you put some amount of pollution into the air that society, collectively, pays the cost of and you will pay only a fraction of the cost. However, it was only you who benefited from the burning of that gallon of gasoline, so now you are deriving a benefit that everyone else is paying for. You are, as you noted, paying market rates but not, as most would agree, the optimal price. You are consuming more gas than you would if you were paying the full cost of its use. This is not a punitive tax, it is a tax to reach the welfare-maximizing price.

And when we were asking for funds, we specifically did not ask for cash; we asked for access to an emergency line of credit, only if something catastrophic should happen to our U.S. competition or if the economy worsened. I’m sure you’ll appreciate that we can’t categorically rule out a business decision without knowing what the market conditions will be in the future.

Scott, thank you for clarifying this. I think it’s been too often mischaracterized that the companies were looking for a handout instead of a loan. But the simple fact of the matter is that the credit markets are still frozen up for big ticket loans like this, and so the only place big companies can go is directly to the government.

I would say gas prices in the US are artificially low. Given the enormity of externalities that come with driving (congestion, security concerns, environmental damage) most will agree that the price of gas (even including federal and state taxes) do not properly reflect its actual cost to the individual and society.

I’ve heard these arguments, and I’ve looked at the numbers, and they dont add up. For example, we do not just use the highway system for personal transportation. DO you really think the benefit we get in terms of variety and low cost of food (supplied to all of our local groceries via trucks from long distances) is outweighed by “congestion, security concerns, & environmental damage” ???? Very obviously it does not.

And the truth is you would have to work pretty hard to get average Americans to agree that taxes on gasoline need to be raised 10 to 20 times their current rate, because somehow the market price of gas doesnt do what “we” want it to.

Still, and the is a question of simple definition here, I dont see how pricing a product at market rates can be defined as being artificially low, while putting punative taxes on a product to discourage its use is somehow “normal.”

And when we were asking for funds, we specifically did not ask for cash; we asked for access to an emergency line of credit, only if something catastrophic should happen to our U.S. competition or if the economy worsened. I’m sure you’ll appreciate that we can’t categorically rule out a business decision without knowing what the market conditions will be in the future.

@Jim S – the Ford Story site is actually a step in that direction. We put it up in just 4 days (over Thanksgiving weekend, no less). The plan is to evolve it to follow that very model.

cross-posted this at Donklephant, and got the usual intelligent and provocative responses from the commentarium there. Well worth the read. Notable was one particular response from Scott Monty, a “Social Marketing” author, guru and blogger who -since…

Since you took the time to post something here might I suggest that one thing to take back to your people is that they move into the 21st century? Car makers, like any other business, wants to establish some brand loyalty among the young. I suggest that someone, in my mind it would preferably be Ford, pay attention to Barack Obama’s presidential campaign? The same tools that forged his coalition among the young would also be effective for businesses that could deliver product they want. An actual interactive community build around the Ford brand could also work. This is something that could be inspired by Microsoft. Go to their web sites and you’ll find that the software engineers have blogs where they communicate with customers. Can you imagine if actual two way communication took place between engineers and other people in important positions and customers?

There is another choice – your local credit union. Stop doing business with banks and use credit unions instead.

First, – You thanked me for taking the time to separate Ford from the “big 3″. You are welcome. Clearly Ford is head and shoulders above the other two now, because of the actions that the company has been taking in recent years. But, as a marketing guy, I’m sure you appreciate that Ford is sleeping in a bed of its own making. When your CEO goes up to Capitol Hill, tin-cup in hand, shoulder to shoulder with two other Detroit based car companies in trouble… well… when you sleep with dogs, you wake up with fleas. You are inviting – no – you are insisting that everyone put all three companies in the same basket. If you want to fix that perception, you have to undo the significant damage done by that performance before Congress.

Ford took a step in the right direction when Bill and Alan said they would not take bridge loans this round. But it was a small step, and an inadequate step because of the equivocation in the statement and leaving the door open for taking taxpayer money later. Ford needs to clearly and publicly cut itself loose from the dead weight that is GM and Chrysler or get dragged down in the mind of public perception along with them. There is an opportunity for Ford to do this. Here, let me help.

This is what Bill Ford needs to say immediately before or after the Paulson announcement to open up the TARP funds to automobile manufacturers:

“The board of Directors have met and we have directed our CEO to withdraw any requests to the Federal government for bailout funds. We regret that we permitted Alan to go to Washington and request federal support. We apologize to the American people for that unfortunate display. It was a mistake. Those actions were not consistent with our culture or our history. My great-grandfather built this company on the American values of innovation, value, quality and hard work. We will grow this company on those same values. This Ford Company chooses to take the right path and grow and succeed by building great cars, with great quality, at a great value, and with outstanding support to our valued clients. We will trust our future to our ability to delight our customers. That is the only way Henry Ford would have it.” – Bill Ford

Also, I went to the link in your comment. There I found highlighted a slide presentation that is designed to make the case that Ford is the same as the other two Detroit car manufacturers, and making the case why Ford is deserving of public funds. That has got to go.

Ok. That should do it. Happy to help. Just keep me in mind when this post goes viral and hordes of angry taxpayers reject GM and Chrysler and come streaming into Ford dealerships to buy cars.

Forget what Andrew says in his comment. The Ford Shelby GT500 Mustang is gorgeous. I like the sliver-blue color scheme in the picture at the top of the post. Just sayin… you know… in case you guys were feeling particularly grateful for my advice.

The bailout is a bad idea in any case.