A Tax You (and Creation) Should Love

By: Thomas Reese

February 3, 2010

You are going to hate this column.

When I first arrived in Washington over 30 years ago, we were experiencing the first of a series of energy crises. There were long lines at gas stations. We were shocked to pay $1 a gallon for gasoline. I had a Volkswagen Beetle so I did not have to gas up very often, but those with big cars regretted it and there was a run on small cars at auto dealerships.

Then gas lines disappeared, gasoline prices came down and we began buying big cars again. This boom and bust cycle repeated itself again and again but we never learned, nor did Detroit or Washington. SUVs and the GM bailout happened because we refused to learn.

Even 30 years ago, economists knew what to do: increase the tax on oil. Higher oil taxes would send a signal though the market to consumers to drive less, switch to mass transit where possible and buy more fuel efficient cars.

No politician had the guts to preach this gospel to the voters. Republicans called for lower taxes on oil producers, even though they pay little taxes already. Republicans also wanted more oil drilling offshore and in wilderness areas. They never thought that we might need to preserve this oil for our grandchildren, who would have safer methods for extracting the oil.

Democrats, at least those not living in Michigan, wanted higher efficiency standards for cars and subsidies to encourage insulation, energy conservation and alternative sources of energy. Politicians from farm states pushed subsidies for ethanol, an expensive and inefficient fuel made from corn and other agricultural products.

Unlike all the complicated government gimmicks to encourage conservation and alternative sources of energy, a tax on oil is simple. It tells consumers to consume less and it tells investors that prices will stay high so they can safely invest in the production of alternative energy.

You might think that a recession is a bad time to put a big fat tax on oil. You are right, but it is not a bad time to start with a small tax. A proposal that makes a lot of economic sense is imposing a tax of one cent a gallon on oil and raising that tax by one cent each month.

Such a tax would not hit consumers over the head with a club, but the hand writing on the wall would be clear: Times have changed and the good old days of cheap energy will not return. Automakers and buyers would know that the days of making and buying gas guzzlers is over. The market would encourage people to insulate their homes, turn down thermostats and buy energy efficient appliances. To the extent it cut down on carbon emissions, it would also slow down global warming.

The tax also makes fiscal sense because it would bring in more money in the future when the recession is over. With future deficits off the charts, new sources of revenue are needed.

Republicans will fear that the money will just be used for more government programs. One way to avoid that is to dedicate the revenue from the tax to paying down the national debt. As an extra incentive, the tax could continue to rise by one cent a month until the Federal budget is balanced. If the budget is balanced for a year, the tax would be reduced by one cent a gallon the following year. If the budget turns red again, the tax goes up the following year.

I told you you would hate this column. But you should love this tax. It responds to four crises that have flummoxed our country: the energy crisis, the fiscal crisis, global warming and terrorism.

Terrorism? Because of our dependency on foreign oil, we are held hostage to Middle Eastern oil producers. Some of these countries use their oil money to support radical Islam and terrorism. In other words, we are paying for both sides of the war on terrorism.

Creation, including oil, is God's gift to us and future generations. If we burn up what took many millennia to create and in the process ruin the environment and put our nation at risk, then we have failed God, our nation and future generations.

Yes, you should love this tax. If you disagree, use the comment below to describe a better program that will deal with the four problems facing our country: the energy crisis, the fiscal crisis, global warming and terrorism.

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