Professor Greg Mankiw of Harvard invites prominent economists and lawmakers who believe that the tax on gasoline should be increased to join the Pigou Club. I invite students to read Mankiw's Pigou Club Manifesto and make a comment below.
Do you support the idea of raising the gasoline tax by $1 over ten years?
What should the tax revenues be used for?
Should the tax be revenue neutral? (This means the new revenue would offset the revenue government receives from other taxes, resulting in no net tax increase on the American people)
Is this a good time to raise the gas tax? The chart below shows average U.S. gas prices over the previous twelve months. Notice the price of gas in Canada. The gap between the two lines represent the difference in the gas tax.
Defend your decision to support or oppose an increase in the gas tax using economic reasoning.
Update: China has bravely announced an increase in its gas tax. Read the full story here. It may interest you to see that it is being offset by reductions of fees and taxes elsewhere and being imposed during a slowing economy. Of course, the Chinese political system makes a tax increase an easier task.
35 comments:
Ethan, Hour 6
I support the idea of gradually increasing the gas tax. I think we serioulsy need to address the environmental and dependence issue caused by gasoline. The tax would be a good first step in reducing are consumption on foreign oil. Also, I think a good use for the revenue collected from the tax would be to invest it in research on alternative fuel sorces for our vehicles. The revenue could eventually help end our use of gasoline in cars completely, which would immensly healp the global warming and foreign dependence issue. I however believe the tax should not be revenue neutral. If it was neutral the government wouldn't be receiving any extra revenue so they would not be able to invest in research to end the problem. Now would not be a good time to initiate the tax either. With the economy in a recesion it could be potentially dangerous to start the tax. The tax should be passed soon however. The environment can't wait another five or ten years. We need to take action now. People may be leary of another tax, but the cost would be split between the consumer and producer and the increase in individual taxes would be mimimal. Therefore I hope the gas tax is passed in the near future.
Kaitlyn A. Hour 6
I think that increasing the gas tax by one dollar over the next ten years is a good idea. By doing this, the government would have a large of amount of revenue to help our country. The government could use the revenue to help with the Social Security and Medicare issue, to repair bridges, or like Ethan said, to help find alternative fuel sources for our vehicles.
The gas tax should not be revenue neutral because then the government wouldn't be able to use the money collected from the gas tax for the things that I suggested above.
The gas tax is a good idea but it shouldnt be put to use right now. Our economy is not in very good condition and a lot of people would probably not respond well to a gas tax right now. A good time for the gas tax would be when our economy improves and is in a little bit better condition. Americans might be bitter about a gas tax but they wouldn't be bearing the full cost of it. People also need to realize that this tax will help our country with the extra government revenue that it will bring in, so I hope that this idea is accepted soon.
Devin, Hour 5
I support the idea of raising the gas tax by $1.00 over ten years. The higher gas tax would encourage people to stop being so dependent on gasoline and could give way to finding other ways to power our vehicles. If we used less gasoline, it would greatly benefit our environment and could lessen the damaging effects of global warming. I think the revenues collected from the gas tax should be used to find other fuel sources, and just to help out government funding with things like retirement and health care to improve our economy. The tax would be a good thing and could lessen our dependence on foreign countries like Saudi Arabia. I don't think the tax should be revenue neutral because than, while the roads would be less congested and our environment could improve, we couldn't receive all of the benefits that the tax would bring us, mainly, a better economy. I don't think this is a good time to raise the gas tax. We've been in recession for about a year now and the economy is suffering, so right now a higher gas tax could hurt the economy more and people would not take well to it at all. I think it should be put into effect as soon as our economy is in better shape. Many people would oppose the idea of the higher gas tax, but if all of the benefits were pointed out to them, they might warm up to it.
Alexi Baldwin, hour 6
Raising the gas tax over ten years is an intriguing idea, that I believe just might lead us get closer to solving our economic and environment problems. From my point of view, the revenue from the tax shouldn't necessarily be used for the environmental crisis since the laws of supply and demand will force less gas to be used. I believe the revenues should instead be used for the growing Social Security need. Making the gas tax neutral adds to its appeal. This would enable the politicians to lower the income tax allowing the bill an easier passage through the senate. It is also an excellent time to add a gas tax because gas is relatively cheap. People are more willing to spend on gas since the price is so low. The low price therefore should be raised to bring gasoline emissions down. Since the tax affects the consumers as well as the producers, if the price was raised people would buy less, leading to the producers producing less.
This would continue over the period of ten years. It would also give the gas companies incentive to find alternate fuel sources. These are the reasons that I have in favor of the Professor Greg Mankiw's gas tax.
Savanna, Hour 6
I support the idea of raising the gas tax 1.00 over a span of ten years. Hopefully, it would be a gradual and painless process that would help financially stabilize our government as well as have environmental benefits. The money collected from the tax could then be allocated towards funding the social security program to make sure that the baby boomer generation is able to retire. I also believe that the tax should be revenue neutral. I think that with proper government budgeting, the government should be able to distribute the collected taxes to make ends meet. However, I do not believe that raising the gas tax would be appropriate during this time. With the economy in a recession, this might drag down the American People's already low morale and worsen the situation. Instead we should focus on improving the economy and from there proceed with the gas tax to reap the political, environmental, and economic benefits.
I believe that the gas tax has good and bad qualities, but what doesn't in this life. For me though, it's what will happen in the long run than in the short run. See, the short run for me, is the fact that I don't make a ton of money, and for now at least the majority goes to paying for gas. But in the long run, I plan to make more than $6.75 an hour, so, the gas tax for the majority of the population, would be a good thing. I agree that it should be done gradually, because then it would give people a chance to adjust. I support it because, not only for the fact that it would reduce oil consumption, maybe not by a ton, but a bit, it would make people say 'do I really need to drive to town to get a gallon of milk or can I just stay home instead.' More people would carpool, more people would think about speeding, thus there would be fewer drivers at nonexcessive speeds thus fewer accidents. Not only that but the government could start looking for alternative forms of fuel, and make the enviroment a much better place.
Okay, so for a change, I'm going to NOT support the gas tax. All of the shall we call them "planks" of the Pigou Club Manifesto assume that a gradual raise in taxes on gas will result in a lower consumption rate. I don't think that would be the case. If you raise a tax that gradually, no one will respond. Perhaps they might in the long run, but as we have already discussed in class, gas is a pretty much inelastic good. Our demand for it will not change drastically with gradual small changes in price. Road congestion would not be decreased. As for "global warming," well, that wouldn't change at all since I don't think it exists. Sure the climate is getting warmer, but the earth goes through cycles. Sooner or later the earth will cool off into another ice age and what will people blame it on then? As for the issue of National Security, if indeed the gas tax could reduce our reliability on the Middle East for gas, couldn't we achieve this end in another way? Why not drill for oil in Alaska? That would achieve the same end. All in all, I don't think the gas tax would have any of the effects that the Pigou Club seems to think it would.
I think that raising the gas tax 10 cents per year over the next ten years would be a very good idea. At first, most people would be outraged at the thought of a gas tax. But it would really help a lot of things in our environment and in our government. The money the government would recieve from the tax could be used to help us find substitues for gasoline that would be more environmentally friendly. The tax would discourage people from driving so much also, which would result in less pollution and less vehicle accidents. The money gained by the tax could also be used to help with other programs that are going to be very important in the next few years, such as Social Security or Medicare. Finally, because we rely on foreign oil so much, we are involved in the affairs of countries that we really shouldn't be associating with. If we were able to tax our oil, decrease the amount of people consuming it, and use the money to find ways for us to produce a new, more efficient source of fuel, we could take our country out of affairs with those countries. But the gas tax should not be imposed now, considering that the economy is in such bad shape. But hopefully we will see this tax sometime soon.
Kaylee, Hour 5
I think that increasing the gas tax gradually would be a good idea. It would help us not be so dependent on oil from foreign places. Raising the gas tax would also help us find better ways to get around. More people would take public transportation than driving their own car a few blocks away and scientists could find better ways to help the environment. But while creating a larger revenue from the tax could help with other needs like social security that need the money. So raising it gradually i think would be more of a benefit because people could adjust to the changes than having troubles if they were to raise fast. Especially now since our economy is having a bit of trouble with money. So i do believe they should pass the tax since it might help us but now a days you never know until you try out.
Jenn, Hour 5
I was going to try to change up the pace and say no to the gas tax, but it seems that Rachel has beat me to it. I guess I really am a short term person. All I can see are the short term effects. There are so many variables intigrated integrated with the long term that it is not always clear if our predictions are going to happen. in the short run, I see road congestion still being there, people with the same cars because they can't afford to buy new ones, and of course the fact that we have to pay more for gas. Right now, we probably wouldn't notice the price as much because it has dropped so steeply in the last weeks, but think back a couple of months ago. Every morning we would wake up and find that gas was still higher. With the high gas prices, everyone didn't just magically turn in their cars for bikes, especially not in northern minnesota where the stubborness roams free. Not so hot in the short run. Now let's pretend that I am a long term person. In the long run, there probably will be economic growth because of this tax. Also, I'm sure that the government will cut back on other taxes therefore lightening the burden on the American people. I believe there will be more road congestion and some people will have to give up the luxury of owning their own vehicle that can take them pretty much anywhere, but there's always the good, safe, and reliable public transportation for those good people. The environment...sure why not, the world doesn't end so soon. All because of the gas tax. Sure, in the long run, I guess the gas tax is a good thing. I just like trying to go against the flow sometimes, but can't fight with futuristic facts. But I don't exactly agree with the line "that while higher gas taxes are unattractive, the alternatives are even worse." news flash, the world isn't going to end in our future.
Amanda, Hour 6
Well, I suppose raising the gas tax little by little wouldn't be the worse thing in the world. Eventually we will probably have to reduce our consumption of gasoline, so we might as well start of small and sort of go from there. I'm not really into the whole "save the environment because global warming is going to kill us all" thing, but I do believe that we should try to find alternative sources of fuel instead of just gasoline. I'm not quite sure how this gas tax would affect that, since it seems to be too small to really force people to go out and change their ways. In the long run it might influence our consumption more, but in the short run I don't believe it will do anything except raise some extra revenue. I don't think we'll truly be able to reduce our consumption until gas prices get ridiculously high or we can find cheaper alternative fuel, because right now the alternatives are too costly. The gas tax revenue could help with issues like the social security and medicare. It sounds like we'll need to generate money from somewhere, so why not just give the tax a try and see if it can not only bring in excess revenue, but maybe reduce our consumption in the long run.
Matt, Hour 6
I strongly support the gradually supporting the gas tax. I think the problem is when other people hear gas tax, they automatically think that the price of gas will suddenly jump up. They don't think of the gradual part. Mankiw makes very good points in all of his categories. The revinue raised from the gas tax could be used for positive things like the social security system. The money could also be used to decrease the United State's dependency on oil. I really agree with Greenspan's comment on how he says it will decrease our involvement in the MIddle East. Our country really needs that right now. I also think it would increase our relations with oil producing countries because right now they do not like us because we consume to much and try to dictate the price too much. This plan sounds like a winner but I do believe it will only work for a short time. Either way, the United States must look further into alternative fuels.
I guess I am not really sure which way or the other I would support. Raising gas prices only a dollar in the span of 10 years really does not seem that bad. But I don't know if people will respond by driving less. People still drove when prices were at $4, even though they complained about it. People still have to get places, and in places like Hibbing, there is not a lot of options for public transportation. Also people who live in the country have to drive to town, and gas prices won't stop that, unless they decide to move. I do not think it would be a bad thing to do, because maybe it would reduce pollution, traffic, etc. However, I definately think that if they are going to start raising the taxes this way, they should wait a few years until we are more stable economically, and I think that they should lessen the taxes in other areas so that the market will be revenue neutral. I think the average American, who doesn't know much about economics, would think about the tax on gas better because then they wouldn't have to pay for something else. Then if they do decide to not buy as much gas, they can save some money that way. I hope that makes sense!
justinh. period 5
I am for the gas tax. Even if it went up one dollar in a year I would support it because the government can use the money. We have already seen that gas is inelastic, so if we did this people would still buy gas and the government could profit from it. We could use that money on good stuff like the mammoth they are trying to resurrect ha :l yup that's about all I have to say.
Chris, Hour 6
After reading all the positive things that would happen because of a $1 tax on gasoline, I have come to favor this idea. It is kind of one sided though and doesnt explain the bad things that could result from this. The tax revenues should go toward helping the federal budget. They would generate extra money that our government could highly use in these times of recession. It should also be revenue neutral. I think this idea is good but right now is not the right time to raise the gas tax. In this time of recession an extra gas tax is not what will help this country the most. The tax should be used once we are economically stable. If this tax would pass the external benefits would outweigh the external costs. This should give leaders incentive to push for the raise in the gas tax.
I think i'll have to agree with Rachel on this one. A gas tax that grows that sluggish will not have the effect Professor Mankiw believes it will. Gas is inelastic, nothing is going to change that. well, except maybe for solar power but i don't think that that is going to work for a while. If the tax is passed, it should be neutral. The government can use it in some way i'm sure! Wether it be for research, security, or somthing else it will be put to use to help our country somehow.
I support the idea of raising the gasoline tax by 1 one dollar over ten years. The gas tax would decrease consumption of oil cause less carbon emissions being produced into the environment. It also would increase governments income, which than could be used to help support Social Security and Medicare benefits. If government did pass the gas tax, they also could reduce the income tax, which would cause people to want to switch from spending to saving and investing.
Bekah :) Hour 5
I am quite confused about with side I am on for this issue. I agree with several statements, but then some just make me change my mind. I believe that this tax would indeed help find alternative sources for which we use for fuel. I agree with what jen said, in the short run, there wouldn't be much difference in any factor. And for road congestion? Gas is basically an inelastic good, so even if the prices rise, people will still buy it. When gas was expensive this summer. we saw that people still drove, even if it took a chunk out of their wallet. One thing i do agree with is the budget crisis. It would help the government, so i'm for that. Okay, looking at the pros and cons, i'm thinking that i agree with this tax to some extent.
Maggie, 6th Hour
I agree and think that the idea of raising the gas tax by one dollar over ten years would be a positive change. I think the tax revenues should be used for environmental issues, such as the reduction of pollution that cars emmit. I also think that it should be used for Social Security and Medicare. Right now Social Security and Medicare are on the down fall and i think this tax could really help with these downfalling issues. I also think the revenue should be used to find alternatives to gasoline. This would also help with the environmental issues.
I think making the revenue neutral is also a good idea. The tax that is put on income could then be lowered and the tax revenue collected could be redirected to a more helpful and positive cost.
I think that this is a good time to raise the gas tax. Gas prices are low and i dont think it will be bothersome for most drivers to pay a little extra.
I can see why many people would oppose this tax at first, but with all the benefits that this tax could bring i think it is a pretty darn good idea. For most of us Social Security may not be around when it is time for us to retire, and the environment might be in major trouble. It is time to do something about all of this. This tax can could make a big difference in our lives.
I think that Pigou's idea is a good one. Its only 10 cents a year so thats not a huge jump. The tax revenue should be used to help the country get out of debt. The country needs more money and this would be a great way to help that without draining the pockets of the people. The tax should also be neutral. Its not that it would provide more money for the government, but people that didn't reduce their driving would end up paying more in taxes in the end. It would be an incentive for us to find other ways of running our vehicles. We might not see a decrease in the number of gallons consumed right away, but in time people will change their ways. This however, is not a good time to impose another tax on the people. So many of us are right on the edge and another tax would toss us over. AS soon as the country becomes more stable this tax should be placed on the gas.
Kyle Period 6
I agree with Greg Mankiw. The idea of raising the gas tax by $1 over the period of 10 years is a great idea. It would solve many problems within our country. It could be used to help out the Social Security crisis and to help cut in to our national debt. Or to help out the education department or for national security affairs. I dont believe that the tax should be revenue neutral however. If it was revenue neutral it would kind of defeat the purpose of the tax because the government wouldnt gain any additional revenue and therefore we would be in the same situation as we were without the tax except for the possible decrease in traffic, emissions, etc. I believe it is a very good time to start implementing the gas tax due to the fact Americans just finished paying 4.00 dollars for gas. If we implement it now gas will only go up to $2.50 or so over 10 years. It would be hardly noticeable to most Americans. This is why I support the gas tax.
I support the idea that Pigou came up with due to the taxation of gas. As we learned in economics class, taxing a good that is relatively inelastic is a good idea. Taxing gas would reduce our consumption of gas and therefore reduce our reliance on foreign countries that hate us and want to blow us up! That would probably be a good thing. This tax would also bring in a ton of money to our government which is very much in debt at the moment. This tax money should be used to pay off the enormous debt and to help out the things that need it most, such as education and roads, and other things of that sort. In theory, this tax should make us use less gas and make the environment cleaner and greener. But I'm not a tree hugger so that doesn't concern me too much. I think that this should be a neutral tax revenue because we already spend enough on taxes. And i believe that now is a good time to start this tax as all of America is paying attention to gas prices and even though they may grumble about a raise in price, they are more apt to use less gas and therefore make this idea work. the end. I'm done
I agree with Greg Mankiw on the idea of imposing a small tax on gas spread out over a few years. It would decrease the crouding of our highways and solve the problem of global warming. I believe that people would use less gas in the long run which is one of the goals that our government has. The revenue from the tax could be used for technology and inventing better, more fuel efficient cars. It could also be used for research for alternative sources of fuel. I think it is a good time to raise the gas tax because our economy has just come off of a time where we have been pulling out our hair over outrageous gas prices. Now the prices have come down considerably and people will not think that two dollars and fifty cents for gas is bad when it was just four dollars a couple of months ago. Since gas is inelastic, most of the burden of the tax is on the consumer which will reduce consumption and therefore remedy our problem with using too much gas. Overall, I think that it is a very good idea even though it is not appealing to the U.S. public it should be considered.
Eric, Hour 6
I agree with gradually increasing the gas tax. Our country is too dependent on foreign oil consumption, which raises questions about our national security. Our oil mainly comes from people whom in fact, don't think too fondly of us, so giving them a fair portion of our nation's money for oil is basis for something to go wrong. Secondly, the revenue from the tax could be used to fund research to finding alternative fuels. Fossil fuels create a negative externality on our environment; it pollutes the air and water we drink. Therefore, using this tax would help lower our consumption and decrease the amounts of toxins put into the air. Plus, with our current economic status, raising the gas tax beginning soon would help our country move out of its recession. Being as though gas came from over $4.00 a gallon to under $1.60, I believe consumers can afford to have a ten cent tax gain if helps pull the country in a positive direction.
Melissa N. hour 6
I support the idea of raising the gas tax. It would create revenue that could be used for research or other things to help the environment. If we raised the tax, elastic consumers might not buy as much. This could help reduce obesity and pollution. The revenue should not be neutral though because the government wouldnt be gaining any revenue, so we couldnt put any money towards research. Also, the economy is bad right now so if we raised the tax, less people would be likely to buy gas and that would help obesity problems and create less pollution.
I agree with Professor Greg Mankiw’s proposal of increasing the gas tax by ten cents per year for ten years. The positive aspects of it far out-weigh the negatives. For starters, a gas tax makes more sense than an income tax. A gas tax encourages people to use less of it which translates to savings, whereas income tax discourages saving. Also, according to the handout, the small increase in gas tax will result in an extra $100 billion per year in government revenue. This money can be use for things like Social Security and nation defense. Other positive externalities are less congested roads and less pollution. Finally, if the tax increases the price of gas by $1 in ten years, the price will only be $2.50 per gallon. A few months ago it was $4.00 so anything less than $3.00 should be tolerable.
Garrett p.6
I beieve in a tax over a ten year period. It would bring consumption down and the oil companies would end up paying more of the tax to keep production up and they would be helping our government to pay for things like roads, medicare, and social security. This should help bring the oil companies down a notch or two.
I support the gas tax over ten years idea. I support it because the tax revenue could be used for things like Medicare and Social Security, so we don't have extremely high taxes when we get older. I also like the idea because it decreases the use of gas consumption and would help with national security. As for the increase in price, after 10 years not many people would be angry because it would be a gradual change and if people paid $4 this summer they would buy gas for $3 10 years from now. Therefore I believe that the gas tax is a good idea.
First, lets pretend i believe capitalism works best so i can properly respond to these questions. Ok then, the first question is if the gas tax should be raised over 10 years. my response to this is that it depends on how much the price of gas rises over the next 10 years in respect to increases in income. If it were to remain constant, relative with rising wages, then i believe we should implement this gas tax. But if we saw a large increase in the cost of gas, then i don't believe that it would be a good idea. for example if over the next 10 years our gas prices rise to what many European countries are paying now(between about $5-$9/gallon) then we shouldn't have a gas tax. I don't believe that the tax should be neutral. If it was i don't think that the tax would be helpful for the main reason i would support it, which is to increase the federal budget.
With current knowledge of the economy I believe that this tax should be used as soon as possible. I have two reasons for this:
1. Gas is low right now, so people wouldn't mind it as much as when the price of gas was $4/gallon.
2. I believe that this tax won't matter as much in as little as 5 years. By then i believe that electric or extremely fuel efficient cars will be developed and ready for mass production, thus eliminating our major gas consumption. Oh, and I'm quite sure this wouldn't even be a problem if we lived in a pure communist utopia. (preemptive reply: I know this wont work because it goes against current human nature...)
"Communism deprives no man of the ability to appropriate the fruits of his labour. The only thing it deprives him of is the ability to enslave others by means of such appropriations."
–Karl Marx
I agree that the idea of an increase in the gas tax is a good notion. What I have a problem with is the way that the money from the tax will be used. I think that the tax revenue should be almost solely used to improve roads, bridges, and other aspects of transportation such as public transit systems. Many of Americas roads are in desperate need of an overhaul, which is extremely expensive. An increase in the gas tax will not reduce the need for people to travel, just how much of it they do by car. That said, I personally do not care if the tax ever makes it to reality as gas is one of the only things that I have to purchase on a regular basis.
In response to what David (Slave to Hyperspace) said: I agree with you on the first point, but completely disagree on the second. The cars that will be produced five years from now are already in process and feature no truly "new" technology at all. It takes any auto maker around five years just to bring a vehicle to market. Also, not very many people, percentage wise, buy new cars, so the argument that fuel efficent cars will be adopted quickly is just a fantasy. One last note, The reason gas costs ~$7 in Europe is mainly because they tax it so heavily.
-Tyler L Period 5
Divya, Hour 5
I agree with the idea of putting a $1 tax on gasoline, it may lower the environmental threat as well as the road congestions in big cities. However, it might not have the same affect that the author here expects. For starters, if cars become too expensive to drive, the transit tickets may become expensive too. It costs the transit company the same amount of tax, so would people really be willing to adjust their time to a new schedule, wait in the cold or heat and pay more to go on a bus?
As for the tax revenues generated it could be used in various ways. In the future we might have to use it on the baby boomer generation but it could also be used to subsidize the transit companies and maybe lower the fares there, build better city structures or just distribute the money to everyone in america according to how much they earn.
I think that the tax should be revenue neutral. In recent economic times, it will be hard for many families to afford the extra tax.
I think it is a good time to raise the tax right now, because we already have the incentive with the recent high gas prices to find an alternative source of getting around. This would just add to the incentive.
Further, many transit systems in many cities are deemed unsafe, these may actually force the government to crack down on these transit areas and make them safe again. With the recent downturn of the economy, with the new demand for transits, we could see a rise in employment there as well.
Lynda, Hour 5
I think that creating a gas tax is a good idea. People will find different ways to get around: public busses, walking, or even car pooling. Less cars on the road means less fuel emissions into the air. I do agree with a few people on the slow pace of the tax. If gas only goes up ten cents a year, no one will really notice a change. Seriously, we've wavered so much in gas prices this year that ten cents would be like heaven!
drew 6
i would only approve of a revenue neutral tax if anything. however i do not even support that because the burden of the tax would be unequal. People believe in the gas tax because it will help the development of more efficient motors and alternative sources. I believe this has already happened and will continue will continue with of without a higher gas tax. the gas tax is used to help us curb our need and wasteful excessive use of gas. I believe that the government needs just that and throwing more money at them in the form of a gas tax gives them the power to spend more and no inscentive to cut back and spend wisely. My final reason is nearly everything in america is developed with the use of oil whether it is in harvesting or shipping or many other processes. A gas tax will raise the prices of all goods and that is exactly what we do not need, especially at this time of economic crisis.
I don't agree with the increasing gas tax over ten years. Some people like it because they feel that there will be more insentive to create better feul or just not use gas alltogether but I feel that they are already working hard I this. I think that raising the gas tax isn't going to make them work that much harder on better fuel. I think it will cost the consumers more without the effect on better fuel that they wanted. If the tax was passed I belive that it should be revenue neutral even though I don't think this concept is nessesarilly fair but I dont think the government should get more of our Money.
the previous post was Aaron period six
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