Raise Gas Taxes to Help States

It may sound like a betrayal of consumers' interest in these hard economic times to advocate raising gas prices, but most states face terrible fiscal conditions and they need to raise more revenues to avoid drastic cuts in services to citizens. Now that gas prices have plummeted, sinking below $2 a gallon, it would be wise for everyone to understand the benefits of states imposing a special tax.

I am not talking about such high additional taxes that would raise retail prices to the awful $3 and $4 dollar a gallon levels that imposed terrible hardships on people. But as the price is dipping toward $1.75 a gallon and some forecasters talking about it possibly going below $1 a gallon in a few months, good citizenship demands that consumers begin to understand that states desperately need to raise revenues. Unlike the federal government, states cannot just print money or go into massive debt. Most states must balance their budgets and without raising more revenues are already cutting vital services to their residents and cutting state government jobs.

The solution and reasonable compromise, therefore, is to modestly increase gas taxes enough to raise significant state revenues but not so much as to create a burden on car users. For example, compared to the $3 and $4 dollar levels that clearly imposed hardships, adding a special 25 cents a gallon tax to keep retail prices in the $1.50 to $2 a gallon range seems like a prudent public policy.

There are a few more arguments in favor of keeping gas prices a little higher than they might become because of reduced oil prices. When gas prices become low again they remove the incentive to cut driving and do more walking and use more public transit, which offers the benefit of reduced pollution that contributes to global warming. Overly low gas prices also reduce the incentives for the auto industry to quickly produce higher mileage cars as well as cars that use different kinds of engine systems requiring little or no gas.

In terms of our dependence on foreign oil, it is also a benefit to prevent gas prices going so low that we keep driving so much that foreign countries maintain their power over us. In other words, in terms of both foreign policy and national security there is a benefit from keeping retail gas prices a little higher so that people to have an economic incentive to drive less and use less gas.

We should all remember that when state governments face fiscal crises we all suffer as libraries cut their hours, as important road maintenance projects are cancelled, as mass transit needs are unmet, as important assistance to the poor is cut, and especially as state employees lose their jobs, adding to the disastrous unemployment that is still mounting and putting even more stress on the consumer economy. I would rather see states increase gas taxes than increase sales taxes, income taxes or real estate taxes.

So think intelligently with civic responsibility and support modestly higher gas taxes.