Is It Time for a New Tax on Energy? (Yes) (WSJ economist survey)

[rcdean]

Economists Say Government Should Foster Alternatives – But Not How Bush Proposes

By PHIL IZZO
February 9, 2007



The government should encourage development of alternatives to fossil fuels, economists said in a WSJ.com survey. But most say the best way to do that isn't in President Bush's energy proposals: a new tax on fossil fuels.

Forty of 47 economists who answered the question said the government should help champion alternative fuels. Economists generally are in favor of free-market solutions, but there are times when you need to intervene," said David Wyss at Standard & Poor's Corp. "We're already in the danger zone" because of the outlook for oil supplies and concerns about climate change, he said.

A majority of the economists said a tax on fossil fuels would be the most economically sound way to encourage alternatives. A tax would raise the price of fossil fuels and make alternatives, which today often are more costly to produce, more competitive in the consumer market. "A tax puts pressure on the market, rather than forcing an artificial solution on it," said Mr. Wyss.
...

In the survey, which was conducted Feb. 2-7, just two economists recommended regulations that require energy companies use more alternatives, one of the keys of the Bush plan...

...the economists said dependence on fossil fuels remains a threat. When asked to pick the greater geopolitical threat to the economy, by almost an 3-to-1 margin the economists chose a disruption in crude oil supplies caused by tensions in the Mideast over the impact on spending and confidence that could follow a major terrorist attack. "The economy has already proven it can survive terror attacks. It had a harder time with almost $80 per barrel oil," said Ms. Swonk.

This is from the WSJ which requires a subscription. But the remainder of the piece does not provide much more on this subject; it discusses Sarbanes-Oxley and other questions asked of this group of economists. Anybody wanting access to the article can message me and I'll send you one of their invitations.

It's a good piece, show's up Shrub's fatuous "energy plan" and points the way to something almost inevitable, though it may not come 'till Jan '09 when the current moron in chief is gone and when it can be done more safely from a political standpoint.

[niceypoo]

1. We need a carbon tax

Wanna pollute? Fork Out. Use the money for hydrogen production research or something simularly useful for halting global warming.

[Jonathan50]

2. Tax on fossil fuels will hurt the poor and lower middle class

Those on the bottom of the economic ladder will bear the brunt of the pain of a fossil fuel tax. They are already living close to or even under the line of survival and any extra costs will help submerge them in debt.

Something has to be done about the dependence on fossil fuel dependency, but making the already struggling lower classes pay for the remedies when they can least afford it seems remarkably unprogressive.

[rcdean]

4. No basis for that notion

People at the bottom do not typically pay for home heating oil (they rent), and if they had to pay another $1 a gallon for gas, they'd be no worse off than they were 1 year ago. This is something that must be done. Maybe we can build in a tax credit of $100 for all people filing a tax return who earned less than the poverty level. We are totally nuts if we don't do this, imo.

[Jonathan50]

17. Not everyone uses oil for heating

And renters do indeed pay for home heating.

When Bush attacks Iran, gasoline is going to go to $5.00 a gallon anyway.

[4dsc]

3. Still missing the big picture

I don't get it.. All this talk about energy and not one person outside Congressman Bartlett is talking about Peak OIl.. Isn't that reason why there's all this talk about so-called alternatives and going green?? Yet they will not let the American people in on that little secret..

Or is their belief that if develope so-called alternatives to oil that we wil somehow magically become "energy independent" or reduce our dependence upon foreign oil?? Do people actually believe the price of gas is going to drop back to a $1 and happy days will be here again?? Let bring back the Fonz for sure!!

[PaulaFarrell]

7. Nah, the global warming will kill us before the peak oil does n/t

[NickB79]

9. Well, we're at Peak Oil now

And as our economy crumbles over the next decade due to this, global warming will give the knock-out blow to our agricultural sectors globally. It won't be pretty.

[PaulaFarrell]

11. maybe - I wish

I used to think Peak Oil was the only thing that would save us from global warming but now I'm inclined to think there's just enough oil left in the ground to give the climate a death blow. I'd like to think we're on the downward slope (in spite of what that would bring) but unfortunately people are too clever for their own good and will probably figure a way to get every last drop. Time will tell I guess. I've gone beyond being terrified to being interested in how it pans out. As they say in China, May you live in interesting times!

[NickB79]

14. Yeah, we'll probably limp along with coal-to-oil or tar-sands-to-oil tech

That will probably cushion the Peak Oil blow to the economy a bit, but will screw the atmosphere even worse than we currently are now, making the impacts of global warming even worse than currently predicted.

[gravity]

5. That will be a poitical disaster

A tax would encourage alternatives, but good luck convincing the American public to accept paying for higher gas prices at the pump.

[jaybeat]

6. But the tax can and should be "revenue neutral"

Tax vehicles getting poor mileage and use the money to subsidize ones with good mileage. The higher the mileage the bigger the tax; the lower the mileage the bigger the subsidy. All of a sudden, hybrids and diesels are cheap, and mega-SUVs are (more) expensive.

Tax vehicles that run on only gasoline and use the money to subsidize ones that can run BioDiesel or Ethanol.

Tax (or eliminate the subsidies on) ethanol made unsustainably (uses more energy/land/other resources than it produces) and use the money to subsidize sustainable ethanol production (from corn waste or other waste biomass).

Tax Diesel #2 and use the money to subsidize BioDiesel. Heck, you could even *cut* taxes (are you listening, *?) on BioDiesel, giving it instant price-parity w/#2. Tax #2 to make up the difference, and Bio becomes *cheaper*. And watch the production capacity skyrocket.

You can do the same thing with other energy sources. Right now, if you want "green" electricity, you have to pay *more*! Tax dirty power to make clean power cheaper. Sell power on a *reverse* sliding scale--normally, the more you buy of something, the less you pay per unit. Progressive revenue-neutral taxes can turn that on its head, so it becomes *cheaper* to conserve than to waste. Where it costs less to do the right thing.

Eventually, of course, not enough people will pay extra for the "bad" stuff to subsidize the "good" stuff. But, by then, you've got the infrastructure re-directed, and economies of scale kick in to make the "good" stuff cheaper w/out a tax.

Another approach that can also be done revenue neutral, is to charge the *total* cost for a product's entire lifestyle. So, a product with excessive packaging costs more than one without, because you pay up front for the disposal costs. This can be revenue neutral, if you lower the taxes that everyone currently pays for the shared disposal costs. Thus you provide a natural incentive to "do the right thing," and at the same time charge the people who "do the wrong thing" the actual costs of that choice.

Really, you could do this with almost anything where private products incur public costs. Wal-Mart employees getting public assistance? Send 'em a bill! They will either have to charge more for their products to pay it (which will lead to people not shopping there as much), or they will do the right thing by their employees.

Look at all the things that are de-facto subsidized by the general-fund taxes that we pay--health care inequality, lack of sufficient mental health and youth services. Wasteful and environmentally destructive products and policies. Wars fought to secure profits from finite resources. Slave-labor for cheap goods and the worlds most populous country turning into a toxic-waste site. (Think all the stuff for sale at Wal-Mart is cheap? Think again!!)

Someone, somewhere, is going to have to pay all of these costs, someday. Why not account for that up front, and in the process encourage choices that will in fact cost everyone less, in the long run?

[PaulaFarrell]

8. People don't actually get to choose which taxes to pay

if there was a tax at the pump, people would either pay it or not drive (as they do in Europe). Of course, it wouldn't work unless Congress was more or less united in pushing the tax.

[Hobarticus]

10. Actually, in this case, they would....

They can choose to curb their use of gasoline, and hence pay less tax.

[PaulaFarrell]

12. True

A great result!

[Hobarticus]

13. Hear, hear!

I've always believed, the only thing preventing us from having European-caliber public transport was cheap gas.

It'll sting, but it'll sting a lot less than the inevitable alternative, down the road.

[TexasLawyer]

15. How about a windfall profit tax while we're at it

Most oil used in the US is domestically produced. Exxon, et al get to float their crude sales prices up to OPEC-influenced world prices regardless of what their actual costs of production are.

Thay are clearly making a killing at America's expense, with enough money left over to corrupt Washington and bribe scientists regarding global warming.

[entanglement]

16. How about increasing income tax on the top 5% and using that to fund alternate fuels R & D?

Of course, the WSJ has to dream up a regressive tax measure that hurts ordinary folk and spares millionaires.