Higher Gas Tax Could Drive Buyers to Fuel-Efficiency, Edmunds.com Says
By Michelle Krebs January 16, 2009
Jeremy Anwyl, CEO of Edmunds.com
(parent of AutoObserver.com
), appeared as a guest on Fox Business News this week where he advanced the idea of a higher gas tax to encourage consumers to buy fuel-efficient cars. Always controversial, a higher gas tax also was being discussed this week at the Detroit auto show, as detailed by Edmunds' Green Car Advisor
. Anwyl chatted with AutoObserver
, providing a deeper explanation of his position.
You told Neil Cavuto, the host of Fox Business News, that you supported a higher gas tax. Explain what you meant.
I'd be the last person standing to suggest we need higher taxes. An argument could also be made that consumers should be able to buy any vehicle they want. But for the past 30 years we have tried to move people to more fuel-efficient vehicles with government Corporate Average Fuel Economy (CAFE) standards put in place by the federal government. It hasn't worked. If the government is going to mandate that automakers focus on building fuel-efficient vehicles, government must also ensure that there will be a market for them. A higher gas tax will help. I also believe that the higher gas tax should be accompanied by an income tax reduction so that government isn't taking additional money out of the economy, but rather shifts the source of the money it does take.
What lesson have we learned from CAFE?
What we should have learned from CAFE is that just because automakers are told to make more fuel-efficient vehicles to meet the government mandates, it doesn't mean consumers will buy them. We have seen that fuel-efficient vehicles tend to be small, expensive and/or loaded with expensive technology. Americans have shown they prefer larger vehicles, the less expensive the better.
How would a higher gas tax make it a successful business case?
Once we agree that government and society have an interest in influencing the vehicle that car buyers purchase -- be it for the environment or energy security or whatever -- then there needs to be a consumer aspect to the approach that encourages people to purchase the fuel-efficient vehicles automakers are required to build. In a market economy, pricing is the most powerful influencer available. Low or wildly fluctuating gas prices make it difficult to motivate buyers to stay committed to fuel-efficiency even though a move to higher fuel-economy cars would reduce dependence on foreign oil and minimize our country's impact on the environment.
How do you know making gas prices higher with a higher tax would work?
We saw last summer that high enough gas prices influence consumer behavior. In the spring and summer when gas prices peaked, consumers dashed to small, more fuel-efficient vehicles. As soon as they subsided from their peaks, we saw consumers ease back to higher gas-consuming SUVs and trucks. Automakers cannot conduct effective product planning when consumer behavior is tied to such an erratic hitching post. Plus we've seen this approach work in other countries. Most other modern countries artificially maintain gas prices and that allows for their citizens to have more predictable household budgets.
But taxpayers vehemently object to any kind of higher tax and more money going into government coffers that they perceive will ultimately be wasted. How do you respond to that?
We do not want to have people pay more taxes, but we strongly believe that a tax would stabilize gas prices and shift consumer preferences for everyone's benefit. Indeed, money raised from a higher gas tax would be in the hundreds of millions over time. Taking that money from consumers and giving it to the government is not a good idea. So while we recommend a higher gas tax, we also recommend a tax cut or credits elsewhere (perhaps in the form of an income tax reduction) so that money keeps flowing in the economy. With this plan, consumers who do reduce their fuel consumption would be money ahead.
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Click here to comment on this entry."An argument could also be made that consumers should be able to buy any vehicle they want. But for the past 30 years we have tried to move people to more fuel efficient vehicles with government Corporate Average Fuel Economy (CAFE) standards put in place by the federal government. It hasn't worked."
Americans haven't gone along willingly, so now you will use force against them?
This makes sense and is what is done in Europe. We all know if gas is more expensive people will choose more appropriate cars. This was proven last summer.
CAFE is a very bureaucratic measure. Using the tax system allows the market system work because people will determine whether having a big V8 is what they really want if it costs money.
It is true that Gas taxes in all other western countries are used to dampen Petrol use.
However if you want a pure economic argument, Petrol in the USA has significant externalities (costs that are not borne directly by the consumer) , both in terms of the security of the Oil supply and through massive environmental costs.
The taxes collected from this tax can go straight into the EPA and the Defense Budgets.
Yep, just keep taxing and so they can spend us into further oblivion. Global warming, climate change, and all the foolish taxation that is accompanying it is nothing more than an excuse for the liberal left to gain a choke-hold on people. THis is preposterous thinking.
This is the typical response when prices go down as demand wanes or the industry fails to make economical cars and trucks. How about eliminating gas taxes and taxing the manufacturers who fail to meet efficiency guidelines? Tax people who buy the gas guzzlers. Tax the states that allow massive traffic jams on their roads during peak hours.
Consumers will buy what products meet their needs. Use taxes on energy are not used to improve efficiency of the products themselves. If we can't buy anything but efficient vehicles, problem solved.
Give us all a break before we break the taxing authorities.
Regards,
OW
Using the tax code to perform social engineering isn't just a bad idea, it's stupid, as well. Name me one instance where raising taxes has produced the desired result. In this case, instead of people buying more gas-efficient cars, they will buy fewer and drive less. When price goes up, demand goes down.
This ought to finish off the weakest domestic manufacturers. This is a really odd proposal from a CEO of a company that lives off the auto industry.
Unfortunately, he's right. As long as national policy is to reduce (and, eventually, eliminate) the use of gasoline, the demand side of the equation is key. A fuel tax will encourage consumers to move toward more fuel-efficient vehicles. It'll also have the side benefit of squeezing all of those leftists who drive around in fuel-sucking SUVs with "no blood for oil" bumper stickers.
On the other hand, if we're going to do this, we should do it all the way. Raise the gas taxes significantly. But trash CAFE and its unworkable regulations.
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