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January 24, 2007
A bigger tangle
Russell Roberts
Greg Mankiw tries to expand the Pigou Club:
Some of my libertarian friends aren't members of the Pigou Club because they view gasoline taxes as a case of excessively intrusive government. But if this tangle of regulation is the alternative, isn't it time for them to reconsider?
But that's a different club. As I understand it, members of the Pigou Club support an increase in the federal gasoline tax on various externality grounds—pollution, global warming and international security issues. I'd be happy to replace all or even most attempts to reduce gasoline consumption via command-and-control and replace them with a higher tax rate. But that Club is a quixotic club—Archer Daniels Midland and others who benefit from ethanol regulation along with whoever it is that benefits from CAFE standards (regulators and politicians who get lobbied to see it tweaked or delayed?) will make sure that Club's mission is never achieved. But the Pigou Club's goal very well may be achieved and will add a higher gasoline tax to the existing tangle of regulations.
The federal tax on gasoline has been increased many times since its inception in 1932. Have any of those increases been accompanied by regulatory simplification?
Posted by Russell Roberts in Politics | Permalink
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Comments
Please someone fill my ignorance....What is the current federal gas tax and what form does it take?
Posted by: Rex Pjesky | Jan 24, 2007 7:26:21 PM
Rex,
http://www.gaspricewatch.com/usgastaxes.asp
The short version: the Federal gas tax is 18.4 cents per gallon. State gas taxes vary from 7.5 cpg to 32.1 cpg. There are often sales taxes on top of that.
Although I like the gas tax idea very much, I share Russell Robert's concern. I don't know how likely it is that we would end up doing away with CAFE and other regulations (and preferably subsidies for ethanol, and other nonsense), as well as some payroll taxes, while also taxing gasoline at the appropriate level. Then again, we're stuck with this awful mess of regulations right now. Can we really do so much harm if we try to simplify things? It has been done in the past, in the cases of airline and trucking deregulation.
More generally, we libertarians are doomed if we give up on all policy simply because we think it's unlikely to improve (since most of our policy positions involve doing away with various bits of government). Then again, maybe we're doomed anyway; libertarians have so little influence as it is.
Posted by: Mike Hammock | Jan 24, 2007 7:57:49 PM
Even on the surface of it, Mankiw is simply saying two wrongs make a right.
Posted by: Ray G | Jan 24, 2007 8:51:12 PM
Is this all really about externalities? I've heard plenty of platitudes about externalities from environmentalists, but when you question them more thoroughly their true motivation becomes clear: they simply hate cars, and in many cases human activity of any kind. That's why they oppose regulatory simplification. I simply do not understand why their rhetoric controls the debate about the environment, especially when so many are clearly irrational and do not respond to reasoned argument of any kind.
Posted by: Bob Smith | Jan 24, 2007 9:50:06 PM
"The federal tax on gasoline has been increased many times since its inception in 1932. Have any of those increases been accompanied by regulatory simplification?"
Correlation doesn't imply causation. Barring drastic decreases in transaction costs, a gas tax (or a general emissions taxing/crediting program) is probably going to reduce externalities by more than the dead-weight loss.
Posted by: Byrne Hobart | Jan 24, 2007 9:52:20 PM
Bob,
Very similar experience here. Everytime I've attempted to get a true eco-type to elaborate on the externalty subject, they've sandbagged, sluffed, and evaded. If I am successful in cornering them, an anti-west, anti-technology bias comes through, and the whole global warming package is simply the vehicle for their ideology. (Pun not intended.)
Posted by: Ray G | Jan 24, 2007 10:14:41 PM
I think the correct correlation to make (and perhaps what Russell Roberts whats getting at) is that a politician will often support an increase in government vis-a-vis an increased tax rate, regulation, etc; in lieu of a loosening of another. However, given the chance they choose the option that yields them the most power... an increase in government, with a tendency to renege on the corresponding "government" contraction. This has been the case whether it be not spending new Social Security taxes on other government activities (by putting said revenue in a separate account), deregulating the auto industry (and relaxing CAFE), or increasing minimum wage in lieu of tax breaks for small firms. Time and again (in the first and second scenarios which have played out in some form) we see that politicians will support the expansion in government with the promise of a future contraction but the record of such being the case is the exception not the rule.
Posted by: Richard Morrison | Jan 24, 2007 11:36:28 PM
So it's quixotic. So what? Don't you often advocate policies that will never be adopted? You and I both favor abolishing the minimum wage. Isn't that tilting at windmills as well? Intellectual honesty demands that we are clear about what our first-best solutions are, even if they are completely impractical.
If you are concerned about ADM and other rent-seekers, then it is important to speak clearly about that, but it seems to me that it's still a relevant question whether the ideal policy, which includes eliminating ethanol subsidies, also includes a Pigovian tax.
Posted by: Eli | Jan 24, 2007 11:41:05 PM
Eli,
I defended quixotic advocacy in this post:
http://cafehayek.typepad.com/hayek/2007/01/the_point.html
And I'm happy to join the Quixotic Pigou Club that pushes for replacing bad regulations with an increase in the gas tax. But don't tell me raising the gas tax is a good idea because it could allow us to get rid of those bad regulations. Yes, it could. But very unlikely. Since it isn't likely to happen, I don't find it to be much of an inducement to join the plain Pigou Club.
Posted by: Russ Roberts | Jan 24, 2007 11:59:45 PM
A tax is a tax is a tax is a way for the morons in our various legislatures to steal our property( money) to further their own selfish objectives.
"Public service" is an oxymoron (there's that word again) unless you think of it in the way a bull "services" a cow.
I think the Pig part of Pigouvain fits perfectly.
thedaddy
Posted by: thedady | Jan 25, 2007 1:22:37 AM
Its a brilliant plan. Lets first increase taxes on the cheapest and most efficient source of energy we have. Then lets use some of this tax money to subsidise diverting large amounts of food into energy production, while keeping a nice chunk of money for the politicians. Food will cost more. Energy will cost more. Government will cost more and get bigger. Its win, win, win. If you can't see the logic, then you're blind.
Posted by: Keith | Jan 25, 2007 7:29:09 AM
"Food will cost more. Energy will cost more. Government will cost more and get bigger."
I agree completely, Keith.
Posted by: JohnDewey | Jan 26, 2007 4:30:34 AM
BTW, Cato's Peter Van Doren gives what I thought was an excellent exposition of libertarians' concerns with the Pigou Club:
Pigou or No Pigou, featuring Peter VanDoren, 11/28/2006 (MP3)
http://www.cato.org/dailypodcast/petervandoren_pigouornopigou_20061128.mp3
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