Could a 'Backdoor Gas Tax' Help Boost Hybrid Sales?

October 13, 2010

The White House said Monday that it will attempt to push a $50 billion transportation bill through Congress during the lame-duck session that will begin in November. President Barack Obama cited urgently needed upgrades and repairs to country’s roads, bridges and transit systems, as well as the spending’s potential to boost employment.

But even with the threat of immediate retribution from voters out of the picture, many in Congress may still be reluctant to take up a spending bill in a political climate where “small government” sentiments seem to be prevailing. The administration says that it will be able to free up enough funding to cover the bill’s $50 billion title by eliminating some tax breaks for the oil and gas industry, though strong opposition would be likely from Republicans and some key Democrats from oil states.

One other proposal that has some support among Democrats would be raising the national gas tax. Such suggestions have always been extremely unpopular in the United States though, and any proposed gas tax hike would be unlikely to make it very far in Congress.

Still, the likely result of eliminating tax breaks for oil companies would also be a slight increase in prices at the pump—or at least that’s what the industry has threatened when the subject has been raised in the past. From 2002 to 2008, oil companies are reported to have received a whopping $72 billion in industry-specific deductions. Current estimates of direct tax credits to the sector put the annual number at least $4 billion annually—not a bad return on the $130 million the industry spends each year on lobbying.

So would eliminating oil subsidies and plugging holes in the tax code that have allowed energy companies to avoid paying billions more each year, effectively serve as a backdoor gas tax? If the industry makes good on its threats, then the answer is yes.

Any sustained increase in gas prices would be a good thing for the hybrid vehicle market, which has slumped recently as a result of cheap fuel and a bad economy that has left many car buyers unwilling to pay extra for added efficiency. For an administration that seems intent on fostering the most dramatic increase in fuel efficiency in the nation’s history, a higher price at the pumps—especially one that could be blamed on the oil industry itself—might not be such a bad thing.


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  • Shines

    Right, oil companies that have been making hundreds of billions of dollars in profits over the past few years need tax breaks. Higher fuel prices will put a strain on the already weak economy, but this is the type of stress that leads to greater innovation. After all, we are already paying a steep price for defending our oil interests on the other side of the globe. In the end we would be much better off reducing the need to defend oil interests especially ones that often fund terrorism against us. Think about it. Taxing fuel may be one of the best ways to help pay for our military expenditures (even if that is not the intent of the tax).

  • Anonymous

    Hey guys

    E15 (15% Ethanol) has been approved for use in vehicles from Model Year-2007. This will help Ethanol challenge Gasolene.

    Its better to buy flex-fuel vehicles.

  • Anonymous

    We need > $5.00 per gallon – I’m afraid this is the only way that the majority of Americans will rethink their choice of car. 99% of the people don’t need those big ugly environment destroying SUV’s (maybe there could be a tax break for those 1% who can proof that they need one). Europeans can do without those (still, some drive them as luxury, but they pay a high price for it) – so why do Americans need them? They don’t compensate for other shortcomings :-)
    This will also force car manufactures to bring more efficient cars to the market – whoever brings out the most fuel efficient car wins. Part of the high tax should be set aside for environmental projects – that way those who decide they don’t care about the environment at least pay for part of the cleanup.

  • JamesDavis

    When Bush gave those oil companies that huge tax break, gas went up to $4.15 a gallon and we lost 10 million jobs. When Obama takes away those huge tax breaks, gas is going to go back up to $4.15 a gallon and he is going to loose the jobs he already brought back. When oil companies was paying regular tax under Clinton, gas was $1.38 a gallon and people could afford to drive to work and there was employed people in this country. If you raise gas tax, unemployment is going to go up. If you decrease gas tax, unemployment is going to go up.

    I think the smart thing to do would be to reinstate the gas tax system that we had under Clinton. The oil companies would have no excuse for raising the gas price and the employed would have no excuse for becoming unemployed. All the incentives we are giving fossil fuels, take them away and give them to the businesses that are rebuilding our roads and bridges. With the huge profits the fossil fuel companies are making while we are in one of the worst recessions in the history of this country, fossil fuels do not need incentives or tax breaks. They should be allowed to make it on their own or go under and let a smarter fossil fuel company take over that knows how to run their company without the incentives or tax breaks.

    This would not be good for hybrids, but that shouldn’t matter because hybrids are worthless pieces of junk anyways. It is going to take 50 years before hybrids are affordable or efficient, so, start mass producing electric cars and their batteries and fossil fuel will no longer have a place in our country and the oil companies will no longer have the power to collapse our economy and un-employee millions of people.

  • Mr. Fusion

    I love the people suggesting $5.00/gal tax. They either have a lot of money or don’t drive. But wait, they must heat their homes.
    When gas goes up, so does diesel and home heating oil—a different colored diesel. Natural gas rides the coattails of oil.

    At the last gas spike’s peak, we paid over $750 to fill our 200 gal oil tank. Needless to say, we had to cut back on many things just to stay warm.

    A sudden raise to $5.00 without an alternative in place and people are going to die in the cold season.

  • BigWu

    Tax breaks for immensely profitable petroleum companies serves no public interest, it only enhances their bottom lines.

    It is, directly, a subsidy on petroleum imports. This damages our already horrendous trade balance. Worse yet, it lines the pockets of the same nations that fund anti-American madrassas and terrorist organizations.

    Eliminating petroleum subsidies is not a tax. Their elimination would allow the free market to reign, making hybrid cars more competitive as well as American coal, hydro, natgas, nuke, and wind powered plug ins and electric vehicles.

    A vote for petroleum-subsidy illumination directly benefits the American taxpayer and American sources of energy.

  • Richy Rich

    If I am rich I dont car how much you raise the gas tax. I am still going to drive my RV with A hummer being pulled! Because I can afford anything gas tax, you’ll be hurting the little people! If you can make RV ev that pulls a Hummer ev and they both run on a batteries or hydorgen, I’ll buy it!

  • veek

    We already pay $5 or so per gallon of gas, we just don’t see it at the pump. Next April 15, figure how much you pay for “oil security,” environmental cleanup, the government’s regulatory bureaucracy, etc.

    Paradoxically, we also give the government plenty of “up-front” tax revenue at the pump, and this is one reason the oil companies get lower tax rates. These tax breaks pre-dated Bush by many years BTW (and are supposed to pay for infrastructure, roads, etc. Yeah, right). Still, a gradually-increased consumption tax for fuel could lower consumption and OPEC/terrorist revenue, and help us live within our means, too.

  • Anonymous

    uf you never served in the military i dont want to hear from ya