Raising The Gas Tax: Auto Execs Push An Unpopular Solution

November 4, 2009

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

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

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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