NCPA - National Center for Policy Analysis

Gas Tax Hike Equals Economic Slowdown

May 2, 2000

Renewed calls for an increase in the federal gasoline tax have caused some observers to wonder what has caused a return of this cry to jack up the cost of a gallon of gas in order to "conserve energy."

  • Along with levies imposed by the states, the federal government extracts 40 cents to 75 cents per gallon.
  • That accounts for 40 percent or more of the retail cost to motorists.
  • Tax backers say Americans should "pay their fair share," the way European and Japanese drivers do -- and pay anywhere from $2 to $4 per gallon.

Observers point out, however, that the free flow of energy at close to market rates is critical for a healthy economy, and that we would not be in the midst of almost 10 years of uninterrupted growth were it not for restraint in applying taxes to fuel.

In many European countries, critics say, high energy prices have helped enforce economic stagnation. One way to guarantee an economic slowdown would be by imposing a 50-cent tax on motor fuels, as advocated by some, including Al Gore, who said in his book "Earth In The Balance" that the internal combustion engine represents "a mortal threat" to mankind. If we're going to mimic Europe, critics argue, why stop at gas taxes? Why not chronic unemployment and low productivity?

Source: Editorial, "No New Gas Taxes," Washington Times, May 2, 2000.

 

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