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