Raise The Gas Tax? Instead, Congress Should Lift The Ban On Oil Exports
It was predictable. Oil gets cheap and now there's a contingent in Congress looking to slap a new tax onto gasoline. What's surprising is that there are some conservatives in both Congress and the pundictocracy also receptive to the notion, including the estimable Charles Krauthammer.
It's a terrible idea. Instead of raising taxes, the Congress should be focused on helping the industry that created the oil glut, and that nearly single-handedly sustained the U.S. economy through the recovery from the Great Recession: America's shale producers who are now subject to nearly unprecedented foreign market manipulation.
But instead, to seduce conservatives, we're debating the merits of a “revenue neutral” means to collect new taxes from (temporarily) cheaper oil. The idea is that the new gasoline taxes would be used only to cut some other tax. Really? A basic law of politics, as immutable as a law of physics, is that a future Congress will always do what it wants.
Not only is there no means for a current Congress to bind a future one, even worse, taxes creep. History is replete with examples. Remember the Social Security tax “lock box”? Nearly $3 trillion has been ‘borrowed' and spent on non-social-security programs from that neutral not-so-locked box. Take this prediction to the bank: a new gasoline tax, however “modest,” will result in a double insult: it will be increased, and it will be plundered.
None of this addresses the folly of raising gasoline taxes when consumers, especially America's financially beleaguered middle class, are for now enjoying the windfall of lower transportation costs. They will appreciate a new tax even less when the next, inevitable, up-cycle in oil prices happens. But next time, with a higher base price courtesy of new taxes, consumers will see even higher peak prices than last time. That alone should give some politicians pause.
Of course, there are those who see a benefit from increasing gasoline prices precisely to discourage oil consumption. This view is fundamentally misguided: there is no inherent virtue in policies that constrain oil consumption.
In fact, the reality is the opposite: there are unequivocal virtues associated with greater consumption of petroleum. Oil-fired engines have created more social and economic freedom for more people than virtually anything else in history. [See, for example, The Bottomless Well, the book I co-authored.]
Rising global oil use is, fundamentally, a measure of rising affluence and greater freedom. As the world becomes wealthier, at least a billion more people will purchase airline tickets and cars for the first time. The vast majority of those cars and all of the aircraft will burn oil. A first priority for America's policymakers should be to ensure that the United States is an increasingly significant player on that world stage delivering abundant, affordable and reliable supplies of oil.
Since the shale oil boom became widely recognized, praise has been rightly given to the thousands of small and mid-sized American oil & gas companies that have contributed so much to job and economic growth, not to mention national security, by whacking back import levels once thought irreversible.
Now many of those companies are struggling through a pricing cycle driven as much by OPEC manipulation as American production. The Economist headlined the economic warfare underway, Sheikhs v shale. Bloomberg news went the whole way with the headline: How OPEC Weaponized the price of Oil Against U.S. Drillers.
Here's something to chew on: Energy Information Administration data shows that even as overall imports have plummeted from rising U.S. oil production, that part of the United States where the majority of refineries are located has seen a 30% increase in imports from the Middle East in the past several years. Imagine: our producers are legally constrained to sell only to U.S refineries while foreign producers can sell into both our markets and those of other nations. In short, foreign interests are free to ‘dump' oil into the very part of the market where so much new domestic production is trapped. Domestic producers have no legal means to compete on a level playing field.
If policymakers feel compelled to do something, why not propose revenue neutral incentives to bolster, rather than tax, U.S. oil production? And the obvious place to start: void the legislative ban on the sale of American crude oil into world markets.
If U.S. producers must deal with the prices set by OPEC production, they should at least be able to compete directly by selling to OPEC customers too. But antiquated laws illogically ban American companies from directly competing on the world stage. Perhaps it's finally time to change that.
This piece originally appeared in Forbes
This piece originally appeared in Forbes