The Case for a War Tax--on Gas

Gas prices are too low. There. I said it. Even when they peak this summer, as most analysts predict, they will be too low. And they're too low in large part because gas is woefully undertaxed in this countrya state of affairs that is bad for the economy, bad for drivers and bad for our foreign policy. In fact, one of the simplest and best things any Administration could do right now would be to add a buck per gallon to the federal gas tax, which is currently just 18.4¢. Now that I have alienated almost every reader of this column, allow me to defend myself.

The worst knock against a gas tax is that it is, well, a tax. Who likes that? But with soaring deficits and a war to pay for, taxes are not an option--they're a necessity. The only relevant question is, Which taxes? The case for a gas tax is a straightforward one. Gas prices are strikingly lower in America than anywhere else in the world; such taxes are relatively easy to collect; since an overwhelming majority of Americans drive, few avoid the tax; and by adding a cost to the wanton consumption of gasoline, you actually encourage conservation, accelerate fuel efficiency, reduce pollution, cut traffic and help wean Americans off the oil that requires the U.S. to be so intimately involved in that wonderful cesspool of rival hatreds, the Middle East. So what's not to like?

The idea is so obviously a good one that in their recent absurd bickering over who is responsible for higher gas prices, neither George W. Bush nor John Kerry has gone near it. That would take a perspicacity most politicians lack. It's worth recalling that even Bush's chief economic adviser, Gregory Mankiw, once supported it. During the golden five minutes of budget surpluses in the late 1990s, Mankiw favored raising gas taxes as a way to reduce income taxes. Such a policy mix, he believed, "would lead to more rapid economic growth, less traffic congestion, safer roads and reduced risk of global warming--all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer."

So why is it so unpopular? Some say it's inherently regressive--that it affects the poor more than the rich. In reality, it tends to affect the middle class more than anyone else, especially those in the suburbs with more than one car. The truly needy tend to consume less gas than their middle-class compatriots. Others say it penalizes those in remote and rural areas. So what? Very few taxes are perfect, and our electoral system--with its over-representation of big agricultural states in the Senate--already pampers the rural. (I'd gladly exchange a gas-tax hike for abolition of agricultural subsidies. Any takers in Iowa?)