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.)
Tags: Gas Price Breakdown, Gas Prices, Gas Taxes, Politics, Thomas Friedman, Why Does Gas Cost So Much
Interesting work, PD! But I still can’t conclude that cheap oil (and gasoline) is ultimately a good thing. When we have to pay more–which is probably appropriate, considering oil’s REAL cost environmentally, politically, etc–we turn on to alternatives to oil (biking, wind power, et al).
I do agree it’d be swell to curb the tidal wave of wealth flooding oil execs’ pockets. We could just de-privatize the U.S. oil reserves, a la Norway. What a wealthy country that is! Norwegians enjoy state-funded child care, health care, maternity leave, education–all sorts of human-nurturing things, all courtesy of oil.
Kelly: Thanks! I’d agree that low gas prices are a bad thing. The point I was trying to make is that while gas prices are rising, none of that money is staying in the U.S.—where it could be used on our own infrastructure, be that electric car charging stations, or high-speed rail, or streetcars, or even less potholed roads. So, even if we’re driving less, and that’s good for the environment/health/etc, we’re not able to capitalize on gasoline’s higher prices to better our country.
Okay…here is my question. Simply adding a tax onto the already high gas prices is not going to keep any less money in the oil execs pockets. They are not going to lower their prices simply because an additional $1 tax is added. Unless the philosophy is that the added tax will reduce consumption which will eventually lower prices. But that risk is placed on the taxpayer backs and many do not have the option of public transportation to work.
Agreed, the crude oil producers are still going to be getting their share. If the US had some more forethought, the tax would have been enacted years ago—it probably would have helped partly reduce demand before we got to this point. Obviously, that didn’t happen. So, we’re in a bad spot: We’re still dependent on oil, but prices are skyrocketing, and we’ve done little to reduce our dependence on cars.
Good post. The gas tax and how to fund infrastructure remains a hot topic in the urban planning world.
Furthermore, the rising gas prices (increase in tax or not) continues to reveal the true cost of “cheap housing.” It’s unfortunate that many of the families that drove out to the exurbs in search of cheap housing or more land are now going to be hit hard with rising gas prices, but it just shows how much we hide the true costs of this type of development.
When gas is cheap, it makes “sense.” When gas prices are high, or -if- you calculated the full cost of environmental degredation, the amount that the government picks up to provide roads and services, and other considerations, it makes a much more compelling case for density (which then supports transit).
So this is my thought! The comment came up that we have not come up with this idea sooner “the one dollar tax”. My question is we seem to take care of everybody else but our country. And with not pushing this tax and encouraging our country to go green with electric cars, we are lining somebody’s pockets on Capitol Hill. It “seems” there is always somebody that is looking out for themselves rather than the greater part of the country. This is more of a question rather than speculation, or trying to start any speculation.
Mr Lutz,
You think if we were to “go green with electric cars” that there wouldn’t be someone’s pockets being lined? Get over yourself there, its just different people, maybe from your point of view the “right people” rather than evil oil execs, who get the benefit of our hard work as taxpayers. There already are plenty of pockets being lined directly from the federal government for new technologies before they are ready for prime time: Google no further than Jeffrey Immelt, GE, windfarms, and Obama. Because wind makes people “feel good” it is worth pouring billions into. Never mind that it cannot be scaled up to meet current demand, never mind that future demand will exceed current demand. No, it makes me look good to push wind so that’s what it’s going to be, damn the future!