Thursday, December 18, 2008

The Create-Jobs, Save-The-Environment, Reduce-Traffic-Congestion, Budget-Neutral Tax Shift

How about an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax? Make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact. Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift.

Okay, I have to work on the marketing.
Actually, I think the name is kind of catchy. :)

On my hope list for the Obama administration, this ranks #1.

It makes no sense to me to mandate that the auto companies create high mileage cars as part of a bailout package. Instead the concession should be that they will not lobby against a gasoline tax (as they have in the past). With higher gasoline prices customers will choose to buy high mileage cars for economic reasons and no additional incentives will be needed for Detroit to build those kind of cars.

Unfortunately, Obama doesn't appear to be in favor of a gasoline tax at this moment.

via Greg Mankiw


Rebelfish said...

And this is a perfect time to raise gas tax too. Cuz people are used to $4/gal gas, so they're not going to be too shocked when gas goes from $2.50/gal to $2.85/gal. Heck, they're used to it being volatile too, so they prob'ly won't even notice.

Fat Knowledge said...

Good point. You could even use the tax as a way to dampen the swings of the market. If prices go up quickly, then the amount of tax goes down. But if prices go down quickly like now, then the amount of tax goes up. I think that gasoline prices shouldn't be allowed to go under $3 a gallon.

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