Asymmetrical Information

I can think of all sorts of reasons the government should give me a $100 rebate. The "pain of high oil prices" is not one of them.

Stupid or not, I'll take the money.

i'm with constant. $100 buys a lot of beer. (even in new york.)

"why not just call it The Official Republican Vote-Buying Act of 2006"

Because we wouldn't know what to do if a politician told the truth.

I prefer to think of it as a poorly implemented one-time federal gas tax refund. They clearly won't take the obvious step of just letting us keep more of our own money, so I guess this is the next best thing.

Not "every American", but"every American taxpayer".
Anyway, I don't think prices are high enough. The American driver needs to have the screws put to him to force reduction in demand. This screw putting should be permanent because we have such short memories.

When I looked at it, the $100 rebate was tied to opening up drilling in ANWR. So, I think the real purpose of this is to open up ANWR, putting the stupid $100 check into it allows more demagouging of anybody who votes against it.

If it takes stupidity of this magnitude to open up ANWR, I'll go along.

My gas costs are up $1600 over last year. $100 isn't enough, should be $2000 (gas prices are going to keep going up). As usual, republicans are out of touch.

When I lived in Germany, I seem to remember gas prices worked out to around $5 per gallon! That was several years back. I don't see any new technologies coming out as a result of European outrage at high gas prices. Would someone suggest that Euros are dumb and incapable of innovation? Then why would it help if gas prices are sky high here?

Revolutionary change can't be forced that easily.

Higher gas prices do nothing except make it so only the wealthier people can drive. And in a nation where we have limit mass transportation, and our country is FAR too sprawling to have an effective train system, it seems unlikely we will ever duplicate the German mass transit system.

Germany is a smaller country where people do relatively less driving than the US. If you have to drive only 1/3 as much as you do in the US then you're just about equal if gas costs 3 times as much.

It's an important consideration that although an arbitrary amount ($100) would be sent back to everyone, the taxes taken from people are taken on a sliding scale. Many, many people would "get back" the hundred dollars they never paid in, while the hundred bucks given back to someone who paid taxes in the tens of thousands of dollars would only be a small percentage. Wouldn't a tax relief plan be better served by using the same sliding scale through which taxes are taken?
Or worse, on a scale where we have to get people to estimate or prove how much gas they bought or plan to buy?

@formereuro: Euro's and Americans pay roughly the same price/mile (American's are a bit less) and when you consider, as JohnJ pointed out, that Euros are less dependent on automobiles it looks like the pricing scheme is roughly similar.

Why don't we raise this to 50% of the taxes you paid?

"I don't see any new technologies coming out as a result of European outrage at high gas prices. "

There are two potential effects of high gas prices: 1) conservation on the part of consumers, plus demand to buy more fuel-efficient alternatives; and 2) incentives for businesses to find a way to supply more fuel, perhaps of a different type, to take advantage of the high prices. The second doesn't apply if the high price goes mainly to the government through taxes and thus doesn't represent a profit opportunity for sellers. So the effect isn't the same, and isn't nearly as large.

ANWR should be opened for drilling in case there actually is some oil there. We aren't running the oil pipeline at capacity any more and haven't for years, so we can get the oil out now.
I doubt there's any oil in ANWR under the usual "if the Republicans say it's true, it must be false" rule of thumb, but hey, it's possible, and the Democrats should stop saving it for a rainy day because it looks to be clouding up. Oil at 75$ is one thing, oil at 75$ for nonpolitical reasons is another. Oil could get a lot more expensive by the time ANWR is producing in the next ten years.

worked out to around $5 per gallon

More diesel usage in europe. The VW diesels are getting scarce here in the US because they're all being allocated to europe.

Agreed. This would be the stupidest tax cut ever. The federal deficit is completely out of control and they want to give $100 because a few people are whining about the gas prices. Give me a break!

$100? That's even more asinine than Congress wasting their time talking about Baseball.

(Not that any amount would be sensible, of course)

Here's the deal. The Republicans are proposing to apply an extra tax to the oil companies, which either, a) since corporations don't pay taxes, I will end up paying or, b) will reduce the oil companies' ability to find new oil, thereby making the gas I buy more expensive.

To make up for increasing the price and/or reducing the availability of gasoline, the Feds will send me $100 out of what they looted from the oil companies.

After that, I will have to report it on my income tax return.

Pretty clever, don't you think? The Feds take $100 of after-tax oil company money and give it to me to be taxed again, simultaneously creating new federal jobs to administer the tax "rebate" program.

I am aware, though, that they already tax me 18.4 cents on every gallon, and my state adds a 6 percent sales tax. This brings my federally mandated gasoline tax to 19.5 cents a gallon.

If the average Michigander buys 15 gallons of gas a week, at 19.5 cents tax per gallon (ignoring the 19.9 cent Michigan tax for this example), that average Michigander would save $152.13 per annum - regardless of the actual price of gasoline - if the federal tax were eliminated. And he or she would not have to pay income tax on his or her "windfall."

Elimination of the existing federal tax would also enable the elimination of the federal jobs administering that tax. Better, our average Michigander wouldn't have to pay additional income tax on money looted from others (including, by the way, shareholders and pension funds), which will reduce his or her annual share of the booty to the $70-something range.

To compensate for the convoluted way in which this GOP proposal would work, I am advocating a rider to the bill which would add oil companies to the list of approved charities.

That way, when I get the $100, I can send it to Exxon and at least get a charitable deduction.

Why is this all that different than a tax cut? Do you consider tax cuts "buying votes" too?

Actually, Jane, the idea of rebating fuel taxes makes a lot of sense -- just not the way they intend to do it.

I'm much older than you and I vividly remember Nixon's gas rationing plan of 1973. We were faced then by OPEC flexing its muscles by both embargoing shipments to supporters of Israel and quadrupling prices.

Had Nixon instead opted to push an increase in federal gasoline taxes of fifty cents a gallon -- with the promise to make it revenue neutral by rebating the monies to our citizenry -- he would have damped demand sufficiently to obviate the need for rationing, AND THE MONIES WOULD HAVE STAYED IN THESE UNITED STATES instead of flowing to the sheiks.

Fuel prices are NOT inelastic.

Fast forward a few years to CAFE standards. Again we see the government's attempts to ration gasoline without using price as a lever (where did these guys study automotive engineering? Why do they think they know better than the manufacturers how to design motor cars?)

Back to your question, Jane.

If the government suggested RAISING the gasoline tax by a buck and rebated it by cutting other taxes, I think that would be a very good thing (provided they cut the right taxes). Even a rebate program is better than letting the extra monies flow to oil producers.

Oil prices are not inelastic. If the extra buck (from $2 to $3) was grabbed by the government (and rebated back to us), we'd have the same effect on the price at the pump and we'd ALL be better off.

Gas taxes, whether applied on a per-gallon or an ad valorem (based on value) basis, are distortionary. They encourage people to consume a little less gas by driving the price up.

I say "a little less gas" becasue public finance theory says that it's better for overall social welfare to tax goods where demand DOESN'T shift very much when prices change. People shifting demand away means that they're distorting their choices -- taking different jobs, driving to Wal-Mart less, etc. And that's not good.

That said, public finance theory ALSO says that the reason to tax these relatively price-inelastic commodities is that you gotta raise the money somehow, and presumably all the other taxes are worse. So giving back $100 without reducing government spending simply shifts the burden to some other good, which by definition will hurt MORE than the gas tax.

I want the $100, too. But I want it to be driven by a cut in government spending so that they don't need the tax revenue, not by an INCREASE in government spending so they'll need to raise income taxes, etc.

Mycroft: Gas taxes mostly pay for road construction and maintenance, which makes them as close to a road user fee as we can get without toll roads. They are only distortionary when they are diverted to other things, such as mass transit. (Or when you do have toll roads, but have to pay the gas tax besides...) Likewise, it's distortionary when general tax revenue is used to give people "free" roads, which encourages more driving without regards to the costs imposed on the road system.

In my mind, "distortionary" is not synonymous with "bad for the economy"; it refers to "changing the consumer's decisions." While altering the consumer's decisions is usually bad from an allocative efficiency perspective, there are exceptions. A Pigou tax is distortionary because it causes the consumer to consume less of the taxed good, but it's an overall good kind of distortion -- it corrects the incentive to overconsume the un- or underpriced resources like you describe which do, indeed, have a marginal social cost of use (roads wear out, etc.) In that respect, the effect of the tax is a counter-distortion -- but the tax itself is still distortionary.

If gas taxes are really designed to "incent" drivers correctly, presumably the amount collected that exceeds the amount actually spent on roads, etc. SHOULD be rebated as a flat gas tax refund -- unless gasoline taxes really are the lowest social-cost way to raise a marginal $100, (which I sincerely doubt.) A Pigou tax would not necessarily equate tax collected with money spent on roads, although it's convenient when it does.

I can easily imagine that if gas taxes are ad valorem (based on the price of gasoline), there is too much tax being collected now. If it's flat-rate per gallon, there is probably too LITTLE tax being collected now.

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