Charles Krauthammer Proposes An Energy Tax?

By Justin Gardner | Related entries in Barack, Economy, Energy, Money, Taxes

Well, yes and no, but it’s refreshing to see that Krauthammer wants to employ some price controls for gasoline. And that’s the bigger story in all of this…that a hard core fiscal conservative sees the need for a more reliable price for gas so the new generation of hybrids will be desirable in the market place.

From The Weekly Standard:

Today we are experiencing a unique moment. Oil prices are in a historic free fall from a peak of $147 a barrel to $39 today. In July, U.S. gasoline was selling for $4.11 a gallon. It now sells for $1.65. With $4 gas still fresh in our memories, the psychological impact of a tax that boosts the pump price to near $3 would be far less than at any point in decades. Indeed, an immediate $1 tax would still leave the price more than one-third below its July peak.

The rub, of course, is that this price drop is happening at a time of severe recession. Not only would the cash-strapped consumer rebel against a gas tax. The economic pitfalls would be enormous. At a time when overall consumer demand is shrinking, any tax would further drain the economy of disposable income, decreasing purchasing power just when consumer spending needs to be supported.

What to do? Something radically new. A net-zero gas tax. Not a freestanding gas tax but a swap that couples the tax with an equal payroll tax reduction. A two-part solution that yields the government no net increase in revenue and, more importantly–that is why this proposal is different from others–immediately renders the average gasoline consumer financially whole.

Here is how it works. The simultaneous enactment of two measures: A $1 increase in the federal gasoline tax–together with an immediate $14 a week reduction of the FICA tax. Indeed, that reduction in payroll tax should go into effect the preceding week, so that the upside of the swap (the cash from the payroll tax rebate) is in hand even before the downside (the tax) kicks in.

Something tells me that an idea like this could work, especially if Obama tells Americans what the consequences of cheap gas are and that this won’t be any cost to them.

Still, this could be spin as a new “tax” increase and my guess is that the Obama team wouldn’t want to wrestle with that any time soon. Which is unfortunate, but one of the realities we all have to deal with in sound bite culture.

Thoughts?


This entry was posted on Monday, December 29th, 2008 and is filed under Barack, Economy, Energy, Money, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “Charles Krauthammer Proposes An Energy Tax?”

  1. TerenceC Says:

    I actually mentioned this type of tax increase in a post several days ago. This is a perfect time to slap a nice tax on gasoline – nothing huge maybe .10 -.15c a gallon – for infrastructure projects. It will also act to keep the Fed’s on top of manipulation of the petroleum markets. It’s like being forced to eat your vegetables – you don’t necessarily like it, but it’s important to your long term health.

  2. David Says:

    Krauthammer proposed this swap a couple of times before, but I hope it gets some traction this time. I think it’s a great idea.

  3. wj Says:

    So don’t make it a “tax on gasoline.” Make it a “tariff on oil” and charge it when it enters the country — whether as crude oil or gasoline or anything else. Same effect, and the “buy American” types (conservatives and liberals alike) can’t object because taxing imports to protect domestic industries is what they are all about.

  4. Brian Krenz Says:

    Excellent idea. We should have been doing this for a long time.

  5. James Says:

    We have this exact kind of tax in British Columbia, Canada. I got a $200 tax rebate, but since I don’t drive, I kept it all.

    The federal Liberal party actually tried to introduce something similar nationally but were SKEWERED by the oil-patch owned mainstream media and subsequently lost the election. Unfortunately the modern day conservative party in Canada prefers to simply do nothing than to try introducing innovative ideas like this. Sadly, most voters heard “gas tax” and shut down their brains right there.

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