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Gasoline Taxes and Fool Efficiency

posted Feb 22, 2013, 10:11 AM by Info@ Transiters
Think increasing automobile fuel efficiency is a good idea? Evidence is that it's foolish.

In a report published in 2005, David Austin and Terry Dinan of the Congressional Budget Office found that a "gasoline tax would produce greater immediate savings by encouraging people to drive less, and eventually to choose more-fuel-efficient vehicles."

Now, Valerie Karplus from MIT and others have published a report that shows that the new auto efficiency standards "will cost the economy on the whole — for the same reduction in gas use — at least six times more than a federal gas tax of roughly 45 cents per dollar of gasoline. That is because a gas tax provides immediate, direct incentives for drivers to reduce gasoline use, while the efficiency standards must squeeze the reduction out of new vehicles only. The new standards also encourage more driving, not less."

Virginia seems on the verge of making things worse by eliminating the Commonwealth's 17.5 cent retail gasoline tax altogether. Even if one doesn't believe in climate change, basic economics will tell you that when there is an over demand for something--such as roadways in Virginia--that the solution is to raise prices--exactly the opposite of what Virginia seems about to do.