Last week, as Thomas Friedman was fretting about democracy in the Middle East, he also renewed his call for a $1 gasoline tax for the U.S., to be slowly phased in starting in 2012:
“Legislating a higher energy price today that takes effect in the future, notes the Princeton economist Alan Blinder, would trigger a shift in buying and investment well before the tax kicks in. With one little gasoline tax, we can make ourselves more economically and strategically secure, help sell more Chevy Volts and free ourselves to openly push for democratic values in the Middle East without worrying anymore that it will harm our oil interests. Yes, it will mean higher gas prices, but prices are going up anyway, folks. Let’s capture some it for ourselves.”
Friedman has been advocating for a gas tax increase since shortly after September 11th, arguing that it’s in America’s national security interest to free ourselves from our dependence on oil from those less-than-democratic countries like Russia, Iran, and Venezuela. A gas tax bump, though, has long been seen as a political non-starter—so much so that Hillary Clinton and John McCain called for a gas tax “holiday” during the 2008 campaign.
Anyway, Friedman’s column got me wondering: When I fill up my car with gas, where is my money actually going to? The oil companies? Taxes? Saudi Arabia?
I did a little research. In America, we pay an average of 41 cents in taxes per gallon of gas: 18.4 cents to the federal government and 22.44 cents to state governments. (State government taxes range from a low of 7.5 cents in Georgia to a high of 37.5 cents in Washington). The federal tax rate hasn’t been raised since 1993—until 1990, in fact, it was only 9 cents a gallon. (Interestingly, Reagan more than doubled the gas tax).
Gas prices, of course, have risen dramatically since 1993, when a gallon was only about $1 a pop. So, if our taxes have remained flat for this long, where is all the money going? The answer: The folks selling crude oil. As you can see in the above infographic, taxes, refining, and marketing/distribution have remained relatively flat over the past decade. Crude oil, meanwhile—which captured about 60 cents a gallon at the turn of the century—is now pulling in more than $2 a gallon! (Click on the image for a larger version of the chart).
Friedman, obviously, believes this is a bad thing—and I’m apt to agree with him. Wouldn’t it be better if the US and/or state governments were taking in a bigger chunk of gas prices, and spending it in and on our country, rather than letting it flow out of the country to some of our avowed enemies?
(Note: I’ve annotated some of the major world events—September 11th, Hurricane Katrina, the Deepwater Horizon Spill—that have impacted gas prices. For more on the demand/supply/speculation problems that drove up prices in 2008—and the subsequent 2009 crash—read here and here.)