The US Federal Gasoline Tax

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The US Federal Gasoline Tax

Category: Case Study

Subcategory: Economics

Level: Masters

Pages: 2

Words: 550

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Analysis of “The U.S. Federal Gasoline Tax: Time for a Change” case
Federal gasoline tax debate has been on continuous lose ends in the economy and American society as a whole. The debate on the plans to reduce harmful emission is one of the main issues for an increase in the tax on gasoline. The government of United States also aims at reduction in fuel imports to decrease the deficit. Most people in the American fraternity believed that increase in the gasoline tax would result that the negative effects would reduce, (Ferrero, Giosuè & Balducci, 33).
Change in the gasoline tax would affect various parties in the society. One of the impacts is that the members of the society would have to drive a fewer miles, and a shift would result to more fuel efficient cars to minimize the cost effect of gasoline. This is a direct impact on consumer behavior since the consumers demand for gasoline will reduce. An increase in gasoline tax will reduce air pollution by the alternative carbon emitting fuels that are in use. A reduction in United States dependency on foreign oil will also result from an increase in gasoline tax. This will result into a positive impact on the government as U.S foreign policy will be controlled and stability of the entire economy will, therefore, be controlled. This was noted by George. W Bush when he said “dependence on foreign oil jeopardizes our capacity to grow.” A change in gasoline tax will also result in the development of innovative technologies that will reduce operational costs in the automobiles industries. Moreover, there will be an increase in standards of cars by manufacturers resulting in a government controlled economy and increase in revenue (Crane et.al, 10).
Timing issue in gasoline tax increase at a time like now exists, when the prices and tax on gasoline have been oscillating, would be very easy on consumers, and this will help tackle various problems such as inadequate highway funding, reduction of high energy habits developed in America and also an initiative to cover the bipartisan tax reform (Ferrero, Giosuè & Balducci, 33).
Currently, the income tax has an under heated debate on its use. The government has continuously used the revenue on roads maintenance and construction. Additional tax on gasoline should be invested in research on better and more improved ways and tax breaks for the conversion of vehicles to hybrids and get new energy sources (Ferrero, Giosuè & Balducci, 33). If these policies are implemented, an increase in tax will serve as a true pigouvian tax if the income tax is used for this purpose. Many economists all over have suggested that this funds from additional tax should be used in funding social security and also balance the budget deficit that is a good take. Thus, these funds have numerous uses but a keen look in the transport and social security will be of much more importance to bring balance in the economy.
Tying or indexing the gas tax to inflation is not a good idea. In the long run, the state needs to have a policy since in any case the tax pay for the roads and maintenance of this commuting channels which is continuously expensive as time goes (Crane et.al, 12). If this is the case, that would mean that those countries with indexed tax will have better roads compared to those which don’t. More money for roads will mean better roads. Thus, the policymakers should be aware that claims of indexing the gas tax are the ultimate consequence of states’ crumbling roads (Ferrero, Giosuè & Balducci, 33).
In conclusion, a federal tax on gas would result in technological innovations, increased government revenues, and well-maintained infrastructure which mean a growing economy. Due to this, an increase in tax should be implemented by policy makers for a better state of the economy and improved infrastructure.
References
Crane, Keith, Nicholas Burger, and Martin Wachs. The Option of an Oil Tax to Fund
Transportation and Infrastructure. Santa Monica, CA: RAND, 2011. Internet resource.
Ferrero, Giosuè, and Camilla Balducci. Us Energy Tax Policy. New York: Nova Science Publishers,
2011. Print.