Tuesday, May 22, 2007

Oil Prices & the Government

Eric Peters at the American Spectator reminds us all about the real reason for high oil prices - taxes. The federal government takes in 18.4 cents per gallon in taxes, and the various states take another 20-30 cents. Nebraska, if I recall takes in 28 cents per gallon. On top of that, some local jursidictions also pile on the bandwagon. This just may be the most regressive tax in the nation.

"Motor fuels taxes account for some 22 percent or so of the current per-gallon cost of gasoline in this country. This is arguably both regressive (because it hits people with low and moderate incomes harder than it does the well-heeled) as well as disproportionate -- since the amount of tax is very high relative to the actual cost of the item being taxed. We don't, for example, stack a tax of 50 cents per quart onto the price tag of milk -- because milk is considered a necessity. But how is gasoline less of a necessity? Maybe we don't drink it -- but most people have little choice about using a car to get to work."

The real tragedy here is that the people that produce the gasoline for our vehicles are always the ones the govenrment and the media blames for the high price of fuel. On top of that, they restrict these companies ability to provide it to us by refusing to let them drill for oil where we know if exists, and even worse, refuse to allow them to build new refineries because no one wants a new refinery in their backyard. As Peters correctly notes, these taxes are supposed to fund the highways we all drive on, and it might be that is where the majority of the money goes, but how much of it is siphoned off by the bureaucracy for other purposes, like funding mass transit systems that almost no one uses. The other issue is there is no guarantee that the money raised remains in the same jurisdiction, due to the way DC decides to reallocate the money. So some states are paying for roads in other states, with only the political power of the congressional delegation influencing the decisions, not where the money belongs or where it might be needed the most.

Doesn't sound like a very good system to me.

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