“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” -- Steven Chu, then-director of the Lawrence Berkeley National Laboratory, in September 2008, to the Wall Street Journal.
"I no longer share that view. Of course we don't want the price of gasoline to go up. We want it to go down." -- Steven Chu on Tuesday, testifying before the Senate Energy and Natural Resources Committee.
(For the record, the 2008 Journal article, published in December 2008 after Chu was nominated to be Secretary of Energy, noted that then-President-elect Obama believed “that a heightened gas tax would be a ‘mistake’ because it would put ‘additional burdens on American families right now.'")
Supporting any sort of a tax hike in an election year is touching the proverbial third rail, but plenty of tax and energy experts believe that increasing taxes on fossil fuels is one of the quickest and most efficient ways to reduce America’s reliance on foreign oil, encourage the development of alternative energy, and address climate change. Howard Gleckman, a resident fellow at the Urban-Brookings Tax Policy Center, offers a concise who’s-who of one-time fuel-tax proponents: As a GOP presidential candidate, John McCain supported cap and trade, effectively a tax on carbon-based fuels. Gleckman points out: “Newt Gingrich used to support cap-and-trade. So did both presidents Bush. As governor of Massachusetts, Mitt Romney initially backed the idea though he eventually abandoned it.” (N. Gregory Mankiw, a professor of economics at Harvard who advised President George W. Bush and is now an adviser to Romney, recently wrote about the benefits of boosting the current 18.4 cent per gallon federal gas tax to $2: “Economists who have added up all the externalities associated with driving conclude that a tax exceeding $2 a gallon makes sense. That would provide substantial revenue that could be used to reduce other taxes. By taxing bad things more, we could tax good things less.)
“The most cost-effective way to reduce pollution is by taxing it,” Ted Gayer, Co-Director of Economic Studies at the Brookings Institution said at a recent symposium called “Reforming the U.S. Tax System” hosted by the Princeton University Griswold Center for Economic Policy Studies. “Taxes are also more effective than subsidies, because they send a signal to consumers to conserve energy and they send a signal to producers to innovate and develop low-cost and cleaner alternatives.”
But it is an election year. Gleckman continues: “Interestingly, carbon taxes enjoy the support of nearly all mainstream economists, regardless of ideology. But most Americans, who seemingly love their cars more than their spouses, are unconvinced. For them, fuel, like healthcare, ought to be plentiful and cheap.”
Your fossil-fuel fact of the day, courtesy of Forbes, which looked at the history of increases in the federal gas tax (first imposed in 1932 and unchanged since 1993): “History tends to show gas taxes don’t seem to have that much impact on the overall economy. The hikes have occurred under both Republican and Democratic administrations: the most prominent increases, in fact, occurred under Republicans Hoover, Reagan and Eisenhower.”
--Reed McManus / photo by iStockphoto/aydinmutlu