Business & Media Institute 
Wednesday, Nov 19, 2008
Gas prices have been in freefall lately, offering a little solace to nervous consumers. But as the Business & Media Institute has documented, many in the media seem to pine for last summer’s “pain at the pump” stories and are quick to say that low gas prices aren’t all they’re cracked up to be. Some have even called for a tax to artificially jack up prices.
But only Washington Post Columnist Allan Sloan has suggested that a heavy federal gas tax would allow the market to “rule.”
On Nov. 18 Sloan wrote that “permanently high gas prices would let the market, rather than incomprehensible, loophole-ridden Corporate Average Fuel Economy (CAFÉ) regulations, guide the decisions on what kinds of vehicles Americans get to drive.”
Sloan argued that fluctuating prices prevent automakers from formulating long-term plans for their products, even as they dedicate enormous resources to comply with CAFE standards. Consumers too, can’t make “rational, long-term decisions” given the “roller-coaster ride we’ve taken in the last year.”
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Instituting a heavy tax at the pump would keep that money out of the hands of unfriendly oil-producing nations and it would insulate the U.S. from “the next spike in oil prices,” Sloan maintained, although he didn’t explain how.
But if experience holds true, that plan wouldn’t protect consumers from price spikes. The same thing was tried in Britain in the 1990s for some of the same reasons. Although taxes amounted to 81.5 percent of the cost of a liter of fuel and forced prices up “from one of the lowest in Europe to now one of the most expensive,” they did nothing to protect U.K. drivers from oil price spikes, according to petrolprices.com.
Sloan also wrote that a tax would protect automakers from the “whipsaw effect – the federal government giving the Detroit Three money to step up production of high-mileage vehicles that will hit the market at a time when low gas prices will destroy the market for them.” That doesn’t sound like a free market.
Sloan acknowledged that the tax would “cause economic hardship, especially to people who are barely making ends meet.” But the government could refund the money “through the income tax.” I’d hate to be counting on those checks.