Tuesday, May 6, 2008

Fuel Tax Break

Every time I post an entry like this, I always preface that I rarely stray into politics on this blog. However, in the case of the fuel tax break, I have to because it relates directly to personal finance.

Let me state it plainly: suspending the fuel tax is stupid.

The fuel (gasoline) tax is a pure consumption tax whose proceeds are designated for infrastructure maintenance and expansion. Rather than taxing the population at large, the greater users of gas, and therefore of public infrastructure, bear the greater weight of the upkeep.

By suspending the fuel tax, where does the money necessary for infrastructure upkeep come from? Well, real taxes, since roads HAVE to be maintained. Essentially you would divert already earmarked funds into the roads, if not take out loans to pay for it.

Many argue that this is an elitist or rich man's argument. It is not. There are 3 primary reasons this is better for the average Joe:

(1) Rich people have more money. They can already buy more gas and keep prices high. If the price dropped, they would want even more gas. Gas will go back to that price, and you would still be in the same place.

(2) Before, rich people already drove more and therefore paid more to maintain the transportation infrastructure. Without those funds, the money would come from general tax revenues. In general, most people would think rich people are paying much less tax relative to average. By taking money from general taxes, we would only widen this gap.

(3) Gas prices are not high because of taxes; it is because we are in high demand of it. Keeping prices high forces efficient car technologies, such as hybrids, to be developed, both saving the environment and costing the average consumer less.

Remember that we elect politicians to make TOUGH decisions that affect the LONG term. If they made decisions based on what everyone wants in the short term, the country would be (already is?) in great trouble.

(And yes, I am an economist, so Hillary doesn't agree with me and believes I'm elitist for having studied economics and wishing to inform the world of my opinion. This, coming from a Yale graduate...)

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