Tuesday, September 27, 2005


A few people recently have encouraged me to write more about, or at least highlight what others have written, about policy. I often shy away from policy, aside from the more obvious stuff, believing for so long that we live in the age of anti-wonk. But, who knows, maybe that's changing.

In any case, we can begin with this about why we should raise gas taxes. We should, of course, though it would be political suicide. Still, it's worth discussing how we could potentially make raising the gas tax both even smarter and perhaps not quite political suicide.

Gas taxes and sales taxes generally are regressive. Regressive bad for good liberals. But, taxing purchases which have negative unpriced externalities simply puts the actual price more in line with the social cost. Consuming gas has unpriced, to the individual, effects on the environmnent and road congestion (and, while harder to quantify, presumably an impact on the cost of our foreign policies). So, increasing gas taxes brings the price of gas in line with its social cost, and therefore brings us closer to a more socially efficient level of gas consumption.

But that doesn't change the fact that gas taxes are still regressive. So, what to do? As the link explains, you offset proposed gas tax increases with decreases in other taxes - optimally other sales taxes, FICA taxes, user fees, or other mostly regressive taxes. That way you discourage the behavior without disproportionately impacting poor people.