It’s time to raise the gas tax. An economist proposing a tax increase? Yes.
Increasing taxes overall is rarely beneficial for the economy, but raising the gas tax will increase the welfare of the country. In earlier posts, I wrote that a higher gas tax makes a lot of sense. An increased gas tax will reduce driving which will have two beneficial effects: less traffic and less pollution. One could use the added funds from the gas tax to improve public transportation, improve infrastructure, or reduce taxes on income or other goods.
Why is now the time to raise the gas tax?
- When gas prices were over $4 per gallon, raising the gas tax was politically infeasible. Now, however, with the price of gas under $2.50 in San Diego, a gas tax increase of 50 cents per gallon would still keep gas prices under $3 (which doesn’t sound too bad anymore).
- Furthermore, the government is looking for new revenue sources to plug its huge deficit and the gas tax is one solution.
- Finally, since the elections have just taken place, politicians have some measure of job security at least for a few years. With this added job security, Congressmen and Congresswomen can increase the gas tax without having to worry about pandering to voters.