Most of the current 18.4 cents per gallon federal gasoline tax is set to expire at the end of September, and there are some indications that it may become the occasion for the next big political fight in Congress. See Politico and Platts for background. Grover Nordquist, of Americans for Tax Reform, says a vote to keep the current federal gasoline tax wouldn’t violate pledges some members of Congress have made not to raise taxes. Still, he’d prefer states keep the gasoline tax money they collect rather than have a portion flow into Washington, D.C., and come back with strings attached.
Now consider that recently that President Obama has been trumpeting a far-reaching agreement to raise CAFE standards over the next 14 years to levels about double the current mileage standard, and that nearly every serious analysis concludes that whatever CAFE can do would be achievable at much lower cost to the economy via an increase in the gasoline tax. A 2005 analysis published in the Journal of Environmental Economics and Management concluded a 12 cents per gallon increase in the gas tax would reduce fuel consumption as much as a 10 percent increase in CAFE, and achieve that reduction at a 70 percent lower cost.
I’d like to propose the following deal: Repeal CAFE, raise the gasoline tax in stages over the next several years, and offset the revenue increases with reductions in other federal taxes. That is “Repeal” with a capital R. Not delay the increases, not block the increases, not anything that keeps CAFE around in the slightest possible role. Repeal CAFE and raise the gasoline tax instead. No net increase in federal taxes, and we toss out a cumbersome, bureaucratic, inefficient regulatory system that has been burdening automakers and auto consumers for years.
UNFORTUNATELY, two problems:
First, hard line anti-tax views will let Members of Congress pretend to small government values for not increasing the gas tax while allowing the much more costly federal intrusion of super-sizing CAFE regulations. Hey Members of Congress, just because it isn’t labeled a tax increase doesn’t mean it is okay!
Second, fuel economy regulations have become more complicated recently, with the EPA assuming a role in regulating CO2 levels and subsequently granting California a waiver to pursue its own related air regulations. One reason automakers said they went along with the CAFE standard increases announced by the White House is that they were afraid of the complications that would come from separate California, EPA, and Department of Transportation regulations all addressing fuel economy directly (USDOT CAFE) or indirectly (California and EPA CO2 regulations).
So my wonderful idea faces challenges from right-wing politics-for-brains types and left-wing state interventionists, meaning repeal of CAFE is – relatively speaking – a radically moderate/centrist and probably sensible proposal.