Its election season, and a couple of the candidates are promising future constituents a tax holiday…but should the gas tax be raised or lowered?
As farcical as it may sound, perhaps raising it would be helpful, but it all depends upon your priorities.
If you dont buy global warming, think the effect of carbon emissions on the atmosphere is negligible, or believe short-term prices should be our top priority, you would probably favor a tax holiday, no pun intended, for the summers 4th of July road trip. Who could argue with having to pay less money to the government, considering maybe those extra dollars of disposable income from the tax holiday could help restore GDP? Tax cuts seem to be a popular concept in this area.
On the other hand, I know a few people who may think global warming is a threat and think reducing carbon emissions should be our number one priority but arent sure how the government could help, which brings us to the ridiculous argument in the title of this article.
Taxes can raise consumer prices or lower consumer prices, but theres one sure thing a raise in a tax will do, and thats shrink the market. A raise in the gas tax would reduce the quantity of petroleum being consumed; therefore, it would also reduce the emission of carbon dioxide from the petroleum being released into the atmosphere. A smaller market of gasoline would result in a reduction of what scientists say is injuring the environment.
Unfortunately, the price of gas at the pump would go up in this case, since the demand for gasoline is so inelastic: A small change in prices doesnt affect the quantity consumed very much.
Most of that tax would be borne by consumers, and hopefully the rising prices would teach some people to carpool or to even walk or bike those few miles for which you previously used your Hummer with A/C and radio on.
But since the demand is so inelastic, a small rise in taxes would result in large government revenue with little inefficiency, and that revenue could possibly be spent in researching and developing fuel with fewer to zero emissions.
Instead of carbon dioxide escaping your pipe, imagine driving along and emitting a trail of bubbles out of your exhaust. Of course, this all depends on your beliefs and priorities.