Writing about OPEC’s rise to actual cartel power, Robert Samuelson writes this sentence about one of America’s short-comings.
We have steadfastly rejected higher gasoline taxes to curb unnecessary driving and strengthen demand for fuel-efficient vehicles (better to tax ourselves than let foreigners tax us through higher prices).
First, higher prices are not a “tax”, they are the result of supply and demand. As Mr. Samuelson points out throughout his essay, world demand is growing. OPEC has control of a large segment of supply. But OPEC does not have the ability to make us pay its prices. Why didn’t he just alter the sentence and write “better to tax ourselves than let foreigners gouge us through higher prices”? It would’ve been as economically (in)correct.
More importantly, the purpose of a tax on gasoline should never be to limit “unnecessary” driving. Unnecessary to whom? If I go to the store to browse for merchandise I have no intention of buying today, is that unnecessary? If a parent drives his child around to help the child fall asleep, is that unnecessary? If a teenager drives his date around aimlessly for an extra half hour so they can talk longer, is that unnecessary?
Taxes to achieve subjective ideals is ideology, not valid public policy. The only purpose for a tax – a user fee – is to rectify the negative externalities from the taxed activity. Carbon emission is an externality. Fifteen cents more for a gallon of gasoline from higher demand is not an externality.
The price of a gallon of gasoline should be the result of market forces. Either people value driving or they value money. But each consumer is the only legitimate decision-maker on that choice.
This is similar to the point I’ve often made about Pigou taxes.
It’s all well and good to try to craft a tax to “correct the externality,” but only if: (a) the externality can somehow be reliably measured or at least estimated, and (b) the revenue is dedicated to correcting the externality (e.g., to fight pollution).
I have yet to see a real-world usage tax that met both criteria. What I see instead are plenty of calls to raise, e.g., cigarette taxes to pay for, e.g., children’s health care. That is NOT a true “Pigou tax.”