18 April 2012

Gas and Taxes

I've been thinking about gas prices ever since we ended up using a credit card to buy $5 worth of gas at a station charging $5.21 a gallon for high test. We were perilously low, blink blink blink, but only needed enough to get a few miles closer to home, where the gas is expensive enough, but not $5.21/gallon expensive. Or really, let's round up and call it $5.22/gallon - who do they think they're fooling with their nine tenths of a cent?

But here's the thing. In the grand scheme of things, gas isn't expensive enough; it ought to cost more, because it should be taxed to the hilt. I did a quick and dirty google search to try and suss out the tax situation, that is, what part of the price of gas is tax related. What I came up with is so all-over-the-map and apples to oranges as to be pretty much useless, but here's a sampling, of just New York:

50.8¢ / gallon

49.0¢ / gallon

63.4¢ / gallon

49.0¢ / gallon

44.25¢ / gallon

To further complicate matters, two of the above links rank the states by tax burden. But the Tax Foundation puts New York first, and Bankrate says "people in North Carolina pay the highest in state and federal gas taxes, at 57.55 cents per gallon. Georgians pay the lowest, at 25.9 cents per gallon." So, who knows? Gas taxes seem to lack any transparency.

For argument's sake, let's say that the gas tax in New York amounts to 50¢ a gallon. If gas costs $5/gallon, that means the tax is about 10% of the cost, and the fuel portion is about $4.50/gallon. In England, taxes on gas are about 60% of the price at the pump. Extrapolating out from the UK numbers, and assuming a base, untaxed fuel price of $4.50/gallon, gas in the US would be about $10.62/gallon if taxes were 60% of the price.

$10.62/gallon might well make people think twice about what kind/size/weight car to drive, and maybe even about driving at all. Right?

The other thing that's happened in the past year or so, though not everywhere, is that there's been a resurgence of cash vs. credit pricing. Honestly, I don't know how the gas stations get away with it - isn't charging more for credit card usage illegal? I suppose they argue that it's a cash discount - but isn't a cash discount essentially the same thing as a credit card surcharge? And they've got you in a bind - the more expensive the gas is, the more money it takes to fill the tank, and I don't know about you, but I charge everything and hardly use cash except at the farmers market. And at five bucks a gallon, putting 20 gallons in the tank is, yes Virginia, one hundred smackeroos, which I don't like carrying around on a regular basis.

Incidentally, high gas prices aren't the President's fault. They're a result of market factors. And not that it's going anywhere, given the hot rhetoric surrounding taxation, but as Richard Thaler points out "at least two of the candidates have shown that they understand the underlying economics. In the past, both President Obama and Mr. Romney have acknowledged that higher gas prices have an upside: they give car owners the right incentives, and if the high prices stem in part from higher fuel taxes, the deficit can be trimmed."

Right. Higher gas prices would be a good thing on multiple fronts.

I guess I'll buy a folding bicycle instead.


Swistle said...

Gas prices is one of those areas where I REALLY DO/DON'T want the change. I don't, because of course I don't want to pay more. But I do, because I'm a business/economics major and I think almost all change in a capitalistic society is financially motivated, and I think increasing gas prices solves a taxes problem AND an environmental problem AND motivates more action to be taken with other energy sources.

Heide Estes said...


RuthWells said...

I agree that gas should be more expensive, with an important caveat - in many, many areas of the US, there is simply no alternative to driving if you need to get anywhere. Inadequate investment in public transportation means that the lag between the higher pricing and the improved fuel efficiency will create very real hardships for a alot of people. I don't know what the solution is.

Jennifer (ponderosa) said...

Catch 22.

My kids ride the school bus (it's 2 1/2 miles to school), and if gas were $10/gallon, I guarantee that bus service would stop. The schools couldn't afford to pay for it. And there is no public bus that goes anywhere near the elementary school. So if there's no public bus, and there's no school bus, then parents like me will have to drive their kids. Which totally defeats the environmental argument...

2 1/2 miles is not that far but I do live on a steep hill and it is winter here for 8 months of the year -- We could theoretically ride bikes, I guess, but I would have to accompany the kids. I'd never let my 8-year-old ride alone to and from school. And if I accompanied them, how would I get in a 40-hour work week?

Gas at $10/gallon changes everything. It could make it financially sound for either my husband or I to quit our jobs just to find time to go to the grocery store. Where, of course, food would be 4x more expensive. So I'd need to grow my own food. Or shoot the deer feasting on my tulips : )

HS BFF said...

We should definitely multiply the taxes on alcohol to 100 times the current cost. That way, people won't make the terrible choices they do. They will make better decisions and we will be bettering them.
Also the government will have more money in its coffers and that will "solve the tax problems". Further the bigger the government the more it knows to spend it so wisely.
We will certainly make sure to trim the deficit then. And I can make a better argument than Thaler's on this one--because then everyone will sober up and realize that we really are going to be at taxarmaggedon--or whatever the NY Times is calling it these days.

Higher taxes are never better on any front. There has NEVER been an example of how this has worked out well.
I am sure you love the Medicare system, social security, the post office etc.
P.S. There are people out there who can not afford to buy folding bicycles.

Cordie Aziz Nash said...

You would think gas would be a deterrent, but I am not so sure. In Ghana, here Gas costs 6 US dollars a gallon. It still doesnt stop people from using SUVs or driving more because its convenient and well. We as humans just have a tendency to be selfish and like to do things that are more convenient for us than mankind.

MARY G said...

We're paying $1.34C per litre (4 to a gallon) in Ontario just now. Not quite up to Ghana prices, but close. Probable rise for summer consumption might be $.20 more. Gov't taxes count for a good bit of that price.
This is not stopping a single soul from leaping into the vehicle and taking off. Including me, as I live a half hour drive from the nearest grocery store.
Escaping gas dependency is going to take a lot, probably a generation or more away, I think.