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Thread: Fuel Economy Tax Reward
12-30-2005 12:51 PM #1
Fuel Economy Tax Reward
I have a novel proposal to reduce wasteful fuel consumption and reward those who economize in various ways. It would be easy to implement and should not impose any overall hardship on the economy.
Let's assume there are 200 million people in the United States. Also assume that each person requires 10,000 miles of transportation per year. If each individual uses some kind of vehicle that gets 40 MPG, this accounts for fossil fuel energy use of 250 gallons per person per year. At $2 per gallon, this is $500 per person. It is also an astounding 50 billion gallons per year, and 100 billion dollars. (The actual consumption, according to an EPA document from 2000, is 130 billion gallons. Some of this is probably for industrial and commercial use, which I have not considered.)
Now, suppose there would be a $2 per gallon federal tax imposed on automotive fuel. At the same time, there would be a tax credit of $500 per person that would be deducted from any documented evidence of transportation expenditure. For anyone who drives a fuel efficient vehicle, there would be no penalty. By carpooling, taking public transportation, or using very fuel efficient vehicles, one would realize a net savings, and possibly reduce their costs to zero.
The real cost will be on those drivers who insist on using a fuel guzzler such as an SUV for overly long solitary commuting, where they may drive 20,000 miles a year at 20 miles per gallon. Such individuals would now pay $1600 per year, less the $500 universal credit, or $1100. This is still probably less than half of their annual car payments.
I think this makes a lot more sense than increasing the allowed monetary deduction per mile because so many people are using SUVs and 300 HP sports cars for basic commuting type business reasons. If an individual or corporation has a legitimate reason for daily use of a heavy truck or performance vehicle, then the costs may be passed on to those who require their services. However, I think it will foster competition from others who can find ways to meet these needs with more efficient means of transportation.
If you look at the possible savings for a family, you should realize that a family of four would receive a possible tax credit of $2000 per year. The tax credit would apply toward all transportation expenses, including, for instance, the purchase of a bicycle or moped for a teenager commuting to school. It could also be set up so that a large expenditure, such as $5000 for a SegWay or an electric vehicle conversion, could be amortized over a ten year period, so your net cost would be zero.
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12-31-2005 03:27 AM #2
Fuel Economy Tax Reward
Yes. The basic sensible approach is to apply a heavy tax on fossil fuels and offset that tax with reduced taxes elsewhere. This is astoundingly obvious, and always has been. A basic purpose of taxation is to reduce consumption of scarce, harmful, or wasteful things.
Many countries in the world have done this. The US has not.