It's time to raise the gas tax
ENERGY experts are warning us about our nation's growing dependence on imported oil, and for good reason. Last year, oil imports accounted for 39 percent of all the oil we used, compared with just 27 percent the year before. And by the early 1990s, imports are likely to account for well over half of the oil we use - a higher proportion, incidentally, than that which triggered our energy crisis of the 1970s, and brought not just the inconvenience of long gas lines, but also two serious recessions, high unemployment, and the worst period of inflation in American history.
If we want to protect ourselves against an even more disastrous energy crisis in the 1990s, we are going to have to stop importing so much oil. To do that, we could try accelerating oil exploration on public lands, developing synthetic or other alternative fuels, or protecting our domestic oil industry by imposing an oil import fee. But these and virtually all other commonly suggested means of increasing domestic production of oil have significant drawbacks, and most would take years to implement.
There's a much better way to cut oil imports: Raise the federal gasoline tax. A higher gas tax would boost our economy by slashing our trade and budget deficits.
Gas prices are now so low drivers have little incentive to conserve fuel. Americans are paying about 45 cents a gallon less than in 1981, when gas prices were at their peak; we are even paying less, in real terms, than back in 1950. The higher gasoline prices that would result would reestablish the incentives we had just a few years ago to buy more fuel-efficient cars and to cut back on nonessential driving. Consuming less gasoline means lowering demand for imported oil.
Nobody likes the idea of paying more for gasoline, but the fact is, we will be paying a lot more for it in the next few years, tax hike or no.
If we do nothing to curb our demand for imported oil, the cost of gasoline will go up because oil supplies will decline, and the Organization of Petroleum Exporting Countries will again be able to raise its prices as it gains more control over the world oil market.
On the other hand, the cost of gas will also go up if we raise the gas tax, but we will have lowered our demand for oil and kept OPEC from raising its prices. We will thus pay ourselves for gasoline, instead of sending our money abroad to fill the coffers of foreign oil producers.
Americans will pay more for gasoline either way, but if we do the sensible thing and raise the price of gasoline ourselves, we will be ensuring that tens of billions of US dollars that would otherwise be spent on imported oil are put to use here at home instead, and we will thus reap enormous benefits. Not only will we protect ourselves from the economic devastation of another oil crisis, but we will also take a giant step toward solving the most troubling economic problems facing our nation today: the trade and budget deficits.
Raising the gasoline tax is one of the few ways available to cut the US trade deficit quickly without resorting to protectionism, which invites retaliation from our trading partners. Because imported oil currently accounts for almost one-quarter of our trade deficit, lowering our demand for just this one commodity will greatly reduce the total amount of money we send overseas.
Raising the gasoline tax is also the most painless way to cut the federal budget deficit substantially. Since every penny per gallon of tax raises about $1 billion annually, raising the 9-cent federal tax by 25 cents, for example, would reduce our annual budget deficit by $25 billion. And even with that additional tax, we would still be paying less for gas than we were paying at the beginning of last year - and far less than the prices drivers pay in most other industrialized nations, where gasoline taxes range from about 80 cents to $1.70 a gallon.
By lowering the trade and budget deficits, we will be ensuring lower inflation and interest rates, less unemployment, and a higher standard of living for all Americans.
We paid a high price for our dependence on imported oil in the 1970s. We will pay an even higher price in the 1990s if we don't soon begin reversing our growing demand for imported oil. We would be fools not to act when, by asking Americans to make a relatively small sacrifice, we can help solve three of our most critical national problems: our vulnerability to a new oil crisis, the soaring US trade deficit, and the seemingly intractable federal budget deficit. A higher tax on gasoline is a wise and necessary step that is long overdue.
Anthony C. Beilenson (D) is a congressman from California.