Tax and Drill

Now here’s something you don’t read every day–a conservative columnist arguing in favor of a gasoline tax.

“[Oil] is now $41 a barrel. We had a golden moment, and we let it pass. The way to lock in our gains then would have been to artificially raise the price of gasoline with a tax that would depress consumption, maintain consumer demand for fuel efficiency and, most important, direct much of the pump price into the U.S. economy (via the U.S. Treasury) rather than having it shipped to Saudi Arabia, Russia and other sundry, less than friendly places.”

He details his idea further:

“The idea is for the government — through a tax — to establish a new floor for gasoline, say $3 a gallon. If the world price were to rise above $3, the tax would be zero. What we need is anything that will act as a brake on consumption. Since America consumes 45 percent of the world’s gasoline, a significant reduction here would bring down the world price.”

“But the key is to then keep the tax. Indeed, let it increase to capture all of a price reduction. Consumers still pay $3, but the Saudis keep getting lower and lower world prices. The U.S. economy keeps the rest in the form of taxes — which should immediately be cycled back to consumers by a corresponding cut in, say, payroll or income taxes. “

If people understood how much of their income was being devoured by payroll taxes, they might not mind gas prices being fixed at $3/gallon if payroll taxes dropped enough. I know I wouldn’t. But the real puzzle is how you’d keep the Social Security and Medicare programs solvent if you cut payroll. I suppose that would start arguments about raising the retirement age, means testing, etc.

Read the whole column here.

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