Bush says we're addicted to gasoline. Is he right? What can be done?
March 1, 2006
By Scott Lewis
On my way to work on February 1st I heard a news blip about the President's State Of The Union address. Apparently President Bush said we [Americans] are "addicted" to gasoline. I was planning to report on the new Pony Car wars spurred by the Detroit auto show displaying three upcoming Pony Cars (the Camaro, Challenger and Shelby GT500 version of the Mustang). However, I was so flustered with the President's "addicted" comment that I thought I should comment myself. The Pony Car story will have to wait until next month.
Addicted To Gasoline
Typical of President Bush, he uses words that were told to him. Addicted! Let's look that up. I looked up addiction on Dictionary.com and they gave these two definitions:
1. Compulsive physiological and psychological need for a habit-forming substance. An instance of this: a person with multiple chemical addictions.
2. The condition of being habitually or compulsively occupied with or or involved in something. An instance of this: had an addiction for fast cars.
Hopefully the Prez was trying to use the second one, at least it mentioned cars in the example.
Are we addicted to oil/gasoline? Hardly. We are "dependent" on it. Are we addicted to the telephone. No, but we need them because so much "depends" on it. Are we addicted to electricity. No. I go camping with my boys and we don't need much electricity on camping trips. Yes, we use batteries when camping, but that is not necessary. We could buy shake or cranking flashlights. I have a propane lantern.
We are dependent on oil/gas just as we are dependent on electricity. We need heat and air conditioning in our homes, and we need phone service.
Gasoline vs. Utilities
Gasoline is not a luxury anymore. Phone service is regulated. Electricity is regulated. Water is regulated. Even cable TV is regulated, though it seems unfairly most of the time. Time Warner can't just change its prices at will. It must get price changes (at least for basic service) approved. The theory there is that poor people that "require" basic cable service should not be charged so much that it is a burden. Hmmm. Poor people could be burdened by the price of a basic necessity. Image that. Could poor people be burdened by the price of gasoline when they need to get to work in the morning. Hmmm. I think we have struck on something.
Gasoline should have its price regulated just like other utilities. It makes sense. But how? Simple... tax. I know, we all hate taxes. But this time it makes sense. We could tax gasoline to maintain a set price. Say, $4.00 a gallon. I know that seems high, but I'll explain below the reason for the high price. Let the tax fluctuate based on market price. If the market price goes up the tax goes down. When the market price goes down the tax goes up. However, the market price must go through an approval process like any other utility. This prevents spikes due to the "possibility" of a problem, even when no real problem exists. Remember how the price went up when Bush announced we were going to war in Iraq. Gasoline prices went up because they knew they could get away with it on the fear of a possible shortage. Also, by going through an approval process it would prevent price fluctuations based on false or forced shortages of crude oil. Finally, the approval process would hopefully prevent oil companies from raising gas prices just for pure profit. Something they would never think of doing now.
The key is what happens to the money collected by this tax. It must go to tax incentives/credits for fuel efficient vehicles and alternative forms of energy.
A Radical Plan
I have a plan that you will think is crazy, but I will bet you $1 that if implemented it would work. The plan starts with the above tax/regulation for gasoline. When gas was $1.75 no one cared about it and SUV and truck sales were off the charts. The auto manufacturers had no incentive to create fuel efficient cars. Oh yes, there was the token economy car, but very few truly fuel efficient cars. At least not here in the good old U.S. of A. Honda and Toyota are pushing Hybrid cars. GM and Ford are attempting to market hybrid SUVs and trucks. Go figure.
As soon as gas prices soared past $3.00/gallon everyone scream gas mileage. Truck and SUV sales dropped like a stone. That's why we need to tax gasoline to a high enough level to force the buying public to demand high mileage vehicles all the time. In Europe gas prices are in the $6 range, and diesel powered cars outsell their gasoline competitors. By keeping the price high we maintain the demand for fuel efficient vehicles.
Next, we need to increase the Gas Guzzler tax. This is a tax on cars that get poor gas mileage. I won't get into what's wrong with the current gas guzzler tax. Trust me on this, my plan will make it work better. For the moment let's just increase the gas guzzler tax for every car that gets poor mileage. We will define poor mileage later.
Next up is to give a tax credit for high mileage cars. A tax credit is just that... a direct credit in your income taxes. This is not a tax deduction. A tax deduction means you lower your taxable income. This impacts different people by different amounts. The big problem is people that don't have enough deductions to itemize their tax returns will not get anything. It has to be a tax credit. At the end of your taxes regardless of whether you had a refund coming or owed money, the tax credit is applied. How much? That is not important yet, but it has to be enough to make people want to pay more for a high gas mileage car. Let's start at $2,000. Hopefully its obvious we will get the money to pay for the tax credit from the gasoline and gas guzzler taxes.
So we tax gas to pay for tax credits. In essence you are no worse off if you buy a high mileage car! We would set the amounts of the tax credits to make it so that people that use it will be better off than they were when gas was cheap, and if you choose not to abide by this you pay through the nose. I would make this a multi-year credit. If you own a car 4 years old or newer you get the tax credit its mileage rating allows. Let's say you buy a car that gets 40 mpg on the highway. You might get a tax credit of $2,000 a year for the first four years you own the car.
We would also give bigger tax credits the higher the gas mileage rating of the vehicle. A car that gets 50 mpg might get $2,500 a year. This has the win-win situation of putting money back in the pockets of those doing their part to help the overall situation and spurring the buying public into desiring fuel efficient cars. I have used numbers to get your attention, but it wouldn't take long to determine the exact dollar amounts for each car based on its mileage rating and an average number of miles driven per year.
Of course, you are all wondering what we will do about people that need to drive gas sucking trucks as part of their jobs. We will account for this. If you require a vehicle that gets poor gas mileage to earn a living then that will be reflected on your taxes. We will require people to keep track of the miles they drive there vehicle for work. If you need a truck we will basically reimburse you the gas tax on your income taxes. If you don't need a truck, but just want one then you pay through the nose for it. Simple. Granted, if you buy a high fuel efficient truck you will also get a tax credit. We will need to carefully balance this so people don't buy trucks to get around the rules for cars. We just want to protect the people that need trucks to make a living.
One thing we really need to do is bring back the CAFE standards (Corporate Average Fuel Economy). CAFE standards are the mileage "targets" the manufacturers need to meet at the fleet level. The CAFE standards haven't left, but for the most part they have been relaxed to take the burden off the manufacturers that sell gas sucking SUVs. The government recently said they were going to breakdown the light truck sector and apply different CAFE levels to difference classes of pickups. This is a good start. Again, this goes back to people that need a certain truck to make a living. We should not penalize a construction worker for needing a full size pickup to haul tools and supplies around. The manufactures need that same break. Their CAFE numbers for cars should not be impacted by the people that need trucks for a living. We can help this along by requiring commercial registration of trucks. If you do not use it as part of your job, you can't get the commercial registration and you have to pay extra for that. Sorry.
Trucks still need an incentive to get better mileage. CAFE does that. We will increase the CAFE standard at a steady rate. The penalty for not meeting CAFE limits will be severe. The "fines" collected for failure to meet CAFE standards also goes to the pool of money that will pay tax credits to consumers. Of course, CAFE fines are levied against the manufacturer, but we all know they pass that on to us.
We will give manufacturers an incentive to make high mileage cars. All the gasoline taxes, gas guzzler taxes and CAFE fines will be used to provide that incentive. Each manufacturer will get money from the kitty to help offset the cost of research and development of high mileage vehicles. The money will be audited so that we know it is going to the proper research. We will adjust the amounts based on results. Meaning, if a company sells more hybrids, they get more research money. If they sell more alternative fuel vehicles they get more money. If they sell more cars that getting better than the average gas mileage they get more funds for research.
The manufacturers that don't do the proper research will be forced to put the lack of incentives into the price of their products, and ultimately the marketplace will tell them what to do.
I mentioned tax credits for high mileage cars, and said we should have different levels. I would try to implement tiers. 30+ mpg on the highway is tier one, 35+ is another tier, 40+ is another, etc. Each tier would have its own incentive value. Buying an alternative fuel vehicle would move you one or two tiers up the chain. We do this to promote alternates, but not to the point that we don't reward improvements in technology to gasoline powered vehicles. This is because we know we can't get off petroleum based fuels overnight.
I mentioned the multi-year payout. We might be able to make this part of your paychecks. You fill out the proper form showing you are making payments on a vehicle that qualifies for a credit then the deductions from your paycheck are adjusted. This is so people don't have to wait until tax time to benefit. This will help the poor the most, who may not be able to handle the high gas price and wait until year's end to recover their incentive dollars.
To make this work we need to do a lot of detail work. For starters we need to fix the mileage rating cars are given. The EPA has been using a testing regiment that is so outdated that there testing never takes a car above 60 mph. With many highways having a 70 mph speed limit it is ridiculous to have such outdated testing. We need to setup a test that is far more indicative of real world driving. No, we won't get it perfect, but we sure can get it a lot closer to reality.
We need to spend a lot of time making sure that the tax credits for decent mileage cars even out for the consumer. Meaning, based on the miles they drive per year (the amount of gas they buy a year) the tax credit puts them at the break even point that they were at before the program. The highest mileage cars would see an increased incentive allowing the customer to actually get back more than they spend on gas. A little profit for those that do the most to help the situation. This may seem unfair, but it is specifically designed to spur people to "do the right thing" and buy the best mileage car they can.
We will also put miles driven into the math. We want to make it so that all the driving you need to do for your job is covered, plus the basics. People that drive all over the place just because they can will pay dearly for those extra miles. Since people don't all drive the same number of miles to work and such, we will make their work mileage part of any paper work and it will be used to determine how many miles they get credit for. In fact, it should be easy for the vast majority of the people. Web sites all over can tell you how far one address is from another. Since your home and work address are already on your tax return it should be a easy to calculate the distance you drive to work on an annual basis. For the exceptions, people that don't work where there paycheck comes from (my wife is a teacher, and her work address on her W-2 is the main office for her school district, not the school she drives to everyday) we would allow them to enter that, and it would be audited. Speaking of audits, we would have audits to the gas tax credit as a separate audit from a typical IRS audit. And yes, there would be an easy audit and a lot of them would be performed. Although we would audit at random, we would try to audit as many "exceptions" as possible to deter people from cheating.
We need to spend a lot of calculator time on the truck situation. We want to make sure people that need trucks are not impacted by this. At least not immediately. We want the truck impact to come from the CAFE program that will drive trucks to better mileage, and to get people to stop buying trucks just because they like them. I have seen people with trucks that use the bed maybe two or three times in the life of the truck. Get a smaller, more economical light truck if your hauling needs are so light.
Finally, since this can impact the poor a lot, we want to provide as much special attention to people that cannot afford a new vehicle at all to get a sufficient incentive to get them into a new (or newer), fuel efficient car or truck. Perhaps people below a certain income level will get a one or two tier boost on the incentive scale. That will put more money back into their pockets for having bought a new car. It will also drive more sales that might never have happened. It should be good for the economy as well.
I know, you all think I am crazy. But I am sure this will work. It requires a lot of commitment, and that commitment will only come from legally forcing this on people. Sorry. We need to put very high taxes on gasoline usage and the thought of gasoline usage (gas guzzler/CAFE) and put lots of incentives on buying and researching fuel efficient and alternative fuel vehicles. It's a simple, but radical plan.
What do you think?