We’re with Lutz: Raise the gas tax

Bob Lutz, the vice chairman of General Motors recently suggested the U.S. begin raising the gas tax as a means for shifting consumers to more efficient vehicles.

“If the rise in gasoline prices is gradual, I think that all of us in the industry would frankly welcome that, because there is nothing more illogical than forcing fuel-saving technology when gasoline is extremely cheap,” he said when asked about any concerns about oil again rising above $80 a barrel.

“You either continue with inexpensive motor fuels and have to find other ways to incent the customer to buy hybrids and electric vehicles, such as the government credits,” he said. “Or the other alternative is a gradual increase in the federal fuel tax of 25 cents a year, which in my estimation would have the benefit of giving automobile companies a planning base, and giving families that own vehicles a planning base.”

Lutz said if a car buyer knew that gas that costs $2.75 a gallon today would likely go to $3 next year and $3.25 the year after that, it would prompt some buyers to say: “You know sweetheart — this time we should go one size down because we know what fuel is going to do.”

Of course the other benefit is it might prompt car buyers to look more closely at bike commuting as well as public transit.

Sure it’s great having the standard article about bike commuting every time there’s a gas price spike, but watching bicycle’s 1% share of trips climb more rapidly would be better.

Lutz isn’t the first to push this. Thomas Friedman has been saying the same.

The two most important rules about energy innovation are: 1) Price matters — when prices go up people change their habits. 2) You need a systemic approach. It makes no sense for Congress to pump $13.4 billion into bailing out Detroit — and demand that the auto companies use this cash to make more fuel-efficient cars — and then do nothing to shape consumer behavior with a gas tax so more Americans will want to buy those cars. As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers.

There has to be a system that permanently changes consumer demand, which would permanently change what Detroit makes, which would attract more investment in battery technology to make electric cars, which would hugely help the expansion of the wind and solar industries — where the biggest drawback is the lack of batteries to store electrons when the wind isn’t blowing or the sun isn’t shining. A higher gas tax would drive all these systemic benefits.

The same is true in geopolitics. A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech.

Which one of these things wouldn’t we want? A gasoline tax “is not just win-win; it’s win, win, win, win, win,” says the Johns Hopkins author and foreign policy specialist Michael Mandelbaum. “A gasoline tax would do more for American prosperity and strength than any other measure Obama could propose.”

Oh, and while Mandelbaum is at it, he can add another “win” for bicyclists.

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5 Responses to “We’re with Lutz: Raise the gas tax”

  1. Everett Says:

    A gas tax is a win only for those that can afford it. For those people that are officially classified as below the poverty line, and the larger number that hover near it in the lower middle class, a gas tax could be the death knell to a family’s already precarious finances. A gas tax is just too much stick and not enough carrot.

  2. Joel Batterman Says:

    Perhaps additional revenues could go to transit, bicycle and pedestrian infrastructure, in the interests of providing some carrot.

  3. Todd Scott Says:

    Great point. Gas taxes are regressive. Perhaps the tax increase could be balanced with an increase in earned income tax credits. And we need to invest more in other transportation modes so that there are more lower cost options available. The average American spends more of their budget on transportation than food.

  4. Everett Says:

    I like the earned income tax credits idea. I was going to suggest a progressive income tax levied with vehicle registration. To make it more palatable towards the business community, this can be paired with tax credits aimed at businesses within Michigan that are working within/towards “green” transportation or whose products are actively encouraging urban density.

  5. Raise the Gas Tax! « Wabi Cycles Says:

    [...] the Gas Tax! In an article found on a Detroit-based blog, it was suggested that the gas tax increase as a way of encouraging motorists to use other forms of transportation. Evidently, Bob Lutz, the [...]

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