Phil for Humanity Phil for Humanity
A Guide for the Survival of Humankind and Helping the World, Society, and Yourself.

The Merits of a Much Higher Gas Tax

When gasoline was over $4.00 per gallon, Americans started to substantially reduce their fuel consumption. Now that the price of oil has come down significantly, the price of gas has gone down to below $2.00 per gallon. At this lower price, gas consumption has started to dramatically increase. Unfortunately, this increase in gas consumption will eventually cause gasoline prices to go back up to their previous levels. I predict this will be a lot sooner than most people expect.

If a tax were placed on gas to keep the price at least $4.00 per gallon, then this would have a lot of consequences… some good and some bad.

For instance, the increase in the price of gas would further stall the U.S. economy by hampering businesses. Some would say that this tax hike would be an unnecessary hardship for most individuals too. I think everyone would agree that this tax would be very bad.

On the other hand, there would be a lot of benefits to an increase in gas tax.

First, alternative renewable fuels are the future on mankind, because oil is limited, causes pollution, and may cause global warming. Additionally, the price of oil will eventually become more expensive than alternative renewable forms of energy as demand increases and supply decreases. Therefore, it is better for mankind to convert to environmentally friendly energy sources sooner. Higher gas prices via taxes would push this conversion much faster than without. Furthermore, this conversion would be much smoother when the demand for oil is lower, such as now, to help prevent huge spikes in gas prices in the future, just as they were seen in 2008.

Second, research and development for new alternative fuels would increase too. Higher prices are a great incentive for exploring new sources of energy, especially if the current prices of gas are known to not decrease in the future.

Third, the estimated total amount of revenue a national $4.00 tax on gas would produce around $2.5 trillion dollars (source: U.S. Department of Energy). Keep in mind that this figure is much more of an estimated guess than a calculated estimate; since it would be very difficult to accurately estimate how much oil consumption would drop if gas prices increased so much. The extra money from this gas tax could be used to pay off the national debt and economic bailouts. Since these bailouts are used to stimulate the economy, hopefully these bailouts would more than offset the impact that higher gas prices would have on the economy. For example, these bailouts should create more jobs, make tax cuts for businesses, increase public transportation to reduce demand on fossil fuels, and create new power plants that use renewable energy sources. In theory, this gas tax should be a boon to the economy if spent correctly. The problem is that no one can be certain if this gas tax would help or hurt the economy more, especially once politicians are involved with spending the money.

In conclusion, higher gas prices are the only way Americans are going to reduce their use of fossil fuels and switch to alternative renewable forms of energy. In my opinion, it is always better to plan ahead and start on this conversion now, than wait until prices are out of control.

Unfortunately, this gas tax could be overly burdensome to many Americans, especially if they are close to the poverty line. Additionally, it may hamper the economy instead of stimulating it. And finally, the unintentional consequences of such a tax could never be fully known. Then again, all taxes have the same problem.

by Phil for Humanity
on 02/16/2009

P.S. The idea for this article was submitted by one of my readers, so I would like to give a special "Thank You" to Mike Gardner.

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