Now is the time for introducing and raising the gas tax level!

Gas prices have fallen by nearly 50% since their June/July peak states facing deficits.

Now is the time to introduce much higher gas taxes -- at the national, state, and local level.

In the long run, it will save the environment. In the short run, it will avoid stupid taxes on production, just when unemployment is racheting up. Do as Al Gore says.

San Francisco Mayor follows Al Gore: Tax waste not work

San Francisco mayor Gavin Newsom is in the kitchen:

Mayor Gavin Newsom plans to ask voters next year to approve a "carbon tax" on businesses that he says would provide a financial incentive for conserving energy and motivating workers to use public transportation.

The ballot measure would increase the city's 5 percent commercial utilities tax by an as-yet-undetermined amount to encourage energy-saving steps by hotels, offices and other nonresidential buildings, Newsom said in a recent interview with The Associated Press.

To keep the higher rates from becoming an economic drag on the city, the initiative would carry a corresponding decrease in the 1.5 percent payroll tax on for-profit businesses in San Francisco, according to the mayor.

Nice, just like Al Gore.

World's largest oil consumer?

The U.S. military, via an article criticizing Al Gore for doing nothing to oppose the same.

If Gore would step up to slicing and dicing (kitchen analogy is a must here) the U.S. military in addition to advocating a carbon tax, he'd have a great one-two punch against global warming!

Readings from the Pigoufather

He recommends The Tax Free Lunch by Charles Krauthammer.

He also recommends A Green Employment Tax Swap: Using A Carbon Tax To Finance Payroll Tax Relief by Gilbert Metcalf.

Both recommend swapping the payroll tax for a carbon tax, same as Al Gore. Kitchen Linker could not agree more.

He is of course Greg Mankiw. Podfather, Pigoufather, get it? Ha ha.

Al Gore's testimony

As reported at Reason, includes:

(2) I believe we should start using the tax code to reduce taxes on production and employment and substitute pollution taxes. We’re discouraging work and encouraging the destruction of the planet’s habitability. We should discourage pollution while encouraging work. Carbon pollution is not currently priced into the marketplace. I internalize air and water and I think that the economic system should too.

Great, but his other nine points consist of a mismash of regulation, prohibition, and subsidy.

Smart people need to advocate the best policy, doing nothing is a false choice (also see Greg Mankiw's criticism of accepting the worst policies by default).

Branson's billions putting brains to work for the earth

Richard Branson's investments in biofuels were welcome but not exciting, as biofuels are marginal at best (and environmental suicide via politics at worst).

With the Virgin Earth Challenge (and some instruction from Al Gore?), Branson's money is working smarter. Very very cool.

The Virgin Earth Challenge is a prize of $25m for whoever can demonstrate to the judges' satisfaction a commercially viable design which results in the removal of anthropogenic, atmospheric greenhouse gases so as to contribute materially to the stability of Earth’s climate.

Another reason a gas tax is ideal

San Francisco Chronicle, Gas prices hardly effect demand.

Record high gasoline prices haven't made a serious dent in America's demand for fuel, a new UC Davis study suggests.

But:

Severin Borenstein, director of the University of California Energy Institute, noted that the UC Davis study measures short-term changes in gasoline use based on short-term price increases.

Long-term changes in driving and buying habits are harder to track but matter far more, Borenstein said. And taxes, which stick around year after year, can prompt drivers to make long-term changes, such as buying more efficient cars or living closer to work.

"That's what actually changes auto fleets, housing decisions, political support for mass transit," said Borenstein, whose institute organized today's research conference. "They're right that this is a little piece of that puzzle, but the jump they make on gas taxes is a stretch."

This however is totally untrue:

Research showing that use doesn't decline much as prices rise undercuts arguments for higher gas taxes.

Rather, it means there is huge latitude for higher gas taxes. And Kitchen Linker says shoot for the moon, cause enacting a high tax that can replace, say the payroll or other harmful tax as Al Gore and others have proposed, is no harder than enacting a small increase. Also from the Chronicle article:

"I would advocate for a tax, but I'm also a realist, and I know it would never work," said Christopher Knittel, a Davis economist and one of the report's co-authors. "It's hard to get a 10-cent gasoline tax passed, much less one over a dollar."

Knittel is wrong to be pessimistic. Join the Pigou Club and make it happen!

Rational energy tax, what would it look like?

Good longish article:

Our national energy tax policy is misguided in at least three ways. First, a policy to promote energy independence through reduced oil imports is based on a fundamental misunderstanding of how energy markets function. A policy that attempts to establish energy independence by promoting domestic fossil fuel production is especially misguided. Second, our policy relies heavily on energy subsidies, most of which are socially wasteful, inefficient, and driven by political rather than energy considerations. Third, current energy taxes are deficient on a number of levels.

The article is from the AEI, a conservative think tank. They use different language, but the policy ends up matching Al Gore's proposal. Also from the AEI article:

Second, we should implement a green tax swap. A green tax swap uses revenue from environmentally motivated taxes to lower other taxes in a revenue-neutral reform. For example, Congress could reduce reliance on oil and other polluting sources of energy by implementing a carbon tax. The revenue could be used to finance corporate tax reform or reductions in the payroll tax. [12] Consider a tax of $15 per metric ton of carbon dioxide--a tax rate comparable to the current carbon price in the European Emissions Trading System. Focusing only on carbon [13] and assuming a short-term reduction in carbon emissions of 10 percent in response to the tax, a $15-per-ton tax rate would collect nearly $80 billion a year, an amount that represents 28 percent of all corporate taxes collected in the United States in 2005. Assuming the carbon tax was fully passed forward into consumer prices, it would raise the price of gasoline by 13 cents a gallon, the cost of electricity generated by natural gas by 0.6 cents per kWh, and the cost of electricity generated by coal by 1.4 cents per kWh.

Or Congress could raise the gasoline tax, index it for inflation, and return the additional revenue through a tax reduction. A gasoline tax increase is less efficient than a carbon tax at reducing carbon emissions. [14] Accepting the references cited above at face value, however, the gasoline tax increase would move us in the direction of the optimal Pigouvian tax on motor fuels, taking into account other pollution externalities as well as congestion and accident externalities. [15]

Next we should eliminate the gas guzzler tax loophole for SUVs and light trucks. Congress might also consider augmenting the gas guzzler tax by shifting to a feebate approach whereby low-mileage vehicles are taxed at increasing rates, as under the current gas guzzler tax, and fuel-efficient vehicles receive a tax subsidy. That could be structured to be revenue neutral.

Bravo!

Pigou manifesto great but too low, too slow and a tax increase

Greg Mankiw in the Wall Street Journal.

Kitchen Linker says:

1) $1/gallon over 10 years is too low and too slow

2) It needs to be revenue neutral, as Al Gore has proposed.

But the manifesto is excellent. Seven reasons you should support this. Call your politico and tell them. Maybe interrupt their lewd IM convo if necessary.

Tax waste not capital

Tyler Cowen in US News and World Report:

Phase out all forms of capital income taxation, including the corporate income tax, and replace them with a carbon tax, including a gasoline tax. "Savings and investment boost economic growth, but when it comes to energy, global warming threatens as a major problem and our dependence on Middle Eastern oil damages our foreign policy."

Kitchen Linker prefers Al Gore's proposal to tax waste not work but either or a combination is critical.

Tax waste not work

Wow, apparently Al Gore wants to replace the payroll tax with a carbon tax. If he runs for president and makes this a centerpiece of his campaign ... I am going all-out for Gore! This is the best thing that could possibly be done for the environment and the economy.

Everyone else, jump on this bandwagon. Read about the Pigou Club.