A group of bi-partisan political veterans think they have the answer to the gas tax issue. For a while now there has been talk of raising the gas tax to pay for infrastructure. The concern though is that it’s a bad idea to raise taxes during a recession.
Former Senator Bill Bradley, former Governor Tom Ridge and former comptroller general David Walker have an idea they think will work- set a new gas tax that goes up or down based on gas prices. When gas prices are high, the tax is low, and therefore more affordable to the average person. When prices go down, the tax would go up, and we wouldn’t notice it much because we would have already been paying high taxes anyway.
Interesting idea but you’re probably thinking it won’t pay for much infrastructure if prices don’t go down. Well the team thought of that too and suggested also placing a 5% per barrel tax on oil that the producer, not the consumer, would pay.
So how much money would this scheme bring in? DCStreetsBlog.org has the answer.
taxing the producer in order to not burden the consumer assumes the producer will pay the tax with their profits rather than with higher prices (to the consumer). which is a silly assumption. the consumer will ultimately pay the tax.
This scheme will help prop up prices. I'm guessing the bi-partisan political veterans didn't have to take that 100-level economics introduction that I did.
If the tax decreases as the price goes up, price increases are essentially being subsidized by the tax. To pick arbitrary numbers: the producer increases prices by ten cents, but the consumer only sees a nine cent increase because the tax indexes down with the price increase. The end result will be that prices drift up a little higher and the tax revenue drops as the market settles into a new price point.
I also had to take that class, it was just so long ago I can't remember much from it. But yes, I think you're right that, just like any other area, the increase will get passed on to the public. Their plan also doesn't address the concern that people buy less gas in hard economic times, so a gas tax increase will still only go so far if there is less gas being purchased overall. Back to the drawing board?