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Raising The Gas Tax: Auto Execs Push An Unpopular Solution

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Legendary HEMI not part of Chrysler’s future powertrains

Legendary HEMI not part of Chrysler’s future powertrains

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We’ve been here before. The government mandates more fuel-efficient vehicles across the board, yet the American public continues to gravitate toward what’s big and powerful.

Barring this era of greater responsibility and restraint, which might pass like a fleeting fancy with the recession, why not pick the bigger or more powerful car, we say?

A lot of things are different this time around, though. Perhaps most remarkably, quite a few executives of automakers and major auto-supplier companies are voicing out in favor of higher fuel taxes—of more rigorous regulation of what types of vehicles can be built and sold—as a way of reducing our consumption.

Gas At $4.89

Gas At $4.89

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At the Reuters Auto Summit in Detroit, executives said that $4-a-gallon gas would have more of an affect on national fuel usage than the $25 billion Energy Department loan program approved by Congress earlier this year.

"We've got to continue to raise taxes in the United States so that, by the end of the next decade, gas is about $8 a gallon in today's terms," said Dura Automotive CEO Tim Leuliette, according to Reuters. Leuliette called the U.S. auto market “an artificial environment.”

Executives are suggesting a gradually rising fuel tax—more specifically, one that’s ‘floating,’ meaning that it would help moderate sharp price swings brought about by refinery issues, or politics.

Naysayers will likely insist that this will destroy the American lifestyle, but at the same time the American lifestyle often involves ridiculously long, time-consuming commutes that might be financially impractical nearly anywhere else in the world.

Clearly in brainstorm mode, the execs included some ideas clearly not quite ready for public consumption. Jerry York, the longtime advisor to billionaire auto-industry investor Kirk Kerkorian (and former GM board member), advocated some sort of subsidy system, like food stamps, to help low-income Americans get past the blow of the higher taxes.

Without it, the tougher fuel economy regulations—ramping up to a federally mandated 35.5-mpg fleet average by 2016—are going to be a bitter pill to swallow. Among the most fuel-efficient models for 2010, the Toyota Prius still reigns king, at 50 mpg (51/48 mpg city/highway); only the 2010 Honda Insight and Civic Hybrid manage to pass 40 mpg with their EPA Combined numbers. And that's hardly enough to displace the hundreds of thousands, if not millions, of much lower-mileage trucks and performance vehicles that the public will still crave.

The final figure comes after a $7,500 federal rebate

The final figure comes after a $7,500 federal rebate

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There’s already evidence that the restraint is fleeting, with more shoppers looking back longingly to larger and less-efficient vehicles. Will shoppers want to buy more fuel-efficient vehicles—like GM’s upcoming Chevy Volt—in large enough numbers to make a difference and offset the continued production of large trucks? Perhaps only if gas prices are higher.

Of course, the executives and investors are looking for profitability, not popularity, and a way to limit future regulation on products. And there is one little obstacle: getting the American public to think that this is a good idea. Until then, it’s political suicide.

Let us know what you think. Is a higher federal gas tax a good idea? Where should the money go? Do you have a better solution? Comment below, or better yet write for us.


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Comments (7)
  1. The gasoline tax again rears its ugly head. "Europe has it, so it must be good" is pure unadulterated crap! This nation is much larger than all of Europe, our trips longer and families far more scattered. This is another elitist idea that flies in the face of our ability to have plenty of oil and gasoline. It is the politicians, not the industry, that is the problem!

  2. Living in Michigan, our government has been talking on and off about this, partly because we are losing more and more funds every year to fix our roads (each summer, construction crews pop up on major roadways because of the harsh winters You know what fixes that? Mandating weight loads of semis in the colder months!.. sorry). It sucks to think about, but gas tax is a hard pill to swallow, depending on your viewpoint. My opinion, to put it short, is that I am against it. I would be all for it if there were other options in place. Everyone mentions "Europe is doing it!" That's great, but residents are connected via Rail. You want to travel to another area (the equivalent of an American going from NY to VA or MI to FL or CA to Vegas), hop on the train and head that way. Sure, we have railways, but it's nowhere near the sophistication of Europeans. Nor, do bus lines and or even air travel function any better. So, that's a knock against the American gas tax. I also believe that in today's economy, most people are unable to afford tax increases, even floating ones. Yeah, it might generate more tax money when the gas prices are lower, but I don't think in today's economic climate, with the federal tax spending ballyhoo of the last few years, people will be hip to it. There NEEDS to be some type of regulation/proof that the money generated is EXCLUSIVELY going towards transportation funding (i.e. road repair, fulfilling mass transit development). Without that, you can kiss American backing goodbye. We've been screwed over too much with our tax money and it's not looking to change anytime soon.
    It's no question though that higher taxes will spur greater interest in more efficient cars (i.e. the Volt and LEAF), but not everyone can afford one of those, or would even want one.
    Oh yeah, and I'm glad Jerry and Kirk (billionaires) suggest "food stamps" for people who can't afford the blow of higher taxes. Good job... another reason to stay at the bottom and sponge off of the government and other good-minded folks. I'm glad these people are in charge.

  3. Are the auto execs promoting this tax actually cutting off their nose to spite their face? A gas tax raising the price per gallon to $8.00 is hardly a solution to the issues at hand. If we really want to incent the American public to buy smaller, more fuel efficient cars, we should probably be looking at a luxury tax for vehicles with MPG ratings of less than 35 mpg. Since America is all about free will, let the consumers who want to drive gas guzzlers foot the bill. But, to raise the gas price to a level where the average American family will be unable to drive cars and commute to jobs would cripple our economy and create a whole new set of issues. That extra $300 per month that would go towards gas would make it nest to impossible for the average family to make a car payment. It would require a completely different infrastructure to support a mass transit system allowing people to commute to work for even short distances.
    On the other hand, perhaps a gas tax driving the price to $8 would generate the revenue to create a decent mass transit system across America. Just think! It would reduce our dependency on automobiles as private cars would be reserved only for the wealth, while the masses would be using rail and other transit systems. It could create a whole new job market re-employing all those laid off auto workers. Just think of the impact on reduced emissions and a greener environment, less dependence on oil, reduced foreign debt and better balance of trade. And we won't even require the American tax payers to continue bailing out companies lead by buffoons!
    Perhaps ridiculous comments from auto execs are cutting off their nose to spite their face. And can you imagine the light rail industry wanting to hire the failed leaders of the auto world? Perhaps the Europeans are on to something!

  4. " Just think! It would reduce our dependency on automobiles as private cars would be reserved only for the wealth, while the masses would be using rail and other transit systems"
    I've thought about it and I think I puked into my mouth a little bit. Having spent a couple of years commuting into Manhattan via train, I'd never do it again. I can't count the number of times I got the flu or some other illness due to be packed into a train car while people cough their lungs out. They can keep their swine flu and I will sit in my own car in traffic, thank you very much.

  5. These elitist CEO's are completely out of touch with the working people of the world. Drive gas to $8 and you'll drive us into the ground permanently. "Mass Transit" is a "Mass Mess" that isn't going to be clamped onto the current or future U.S. Take a look at the current Philly Transit strike, want that everywhere? Imagine all the NIMBY lawsuits and environut lawsuits when you actually start trying to implement a Mess transit system.
    These guys are wankers and should be asked to leave the public stage. Try fixing your broken companies first you idiots and stop "speaking".

  6. This is not playing out well. These new CAFE requirements will take effect in 2020, which might as well be never. That just gives the politicians time to take more "contributions" and car makers more time to lobby in DC--reminds me of our tax code. The gas tax is the most logical solution to higher mileage requirements, which is why it will never be approved. So instead, I wish team Obama would have gotten the car industry to commit to standards that were do-able by 2012 (end of term). Say 29 mpg. If each automaker meets the goal, no additional taxes. If an automaker misses the goal, their customers have to pay a one-time "not-a-team-player" sliding scale registration tax based on how crappy their mileage was. Every year it creeps up. Every year new car owners pay a hated new tax to buy their favorite gas guzzler. Voila--incentive for automakers to meet new targets, incentive for buyers to purchase from a manufacturer that is compliant. Otherwise, it's just a bunch of words and posing for the cameras.

  7. Make everyone suffer, even the ones that try to be smart and efficient, or hmmm... just heavily tax vehicles that weigh over a set weight (Say 3800 lbs) and get SUV/TRUCK gas mileage(less than 20 mpg combined perhaps). Not that hard. That will teach America better than higher priced gas. Guarantee you, if Americans have to pay an extra 10%-15%($3000-%4000) of the vehicle's value, those inefficient gas guzzler's sales will tank.

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