Should the US Adopt Gas Taxes as High as Europe?

Everyday there are news stories about record gas prices in the U.S. Consumers are constantly complaining and overall consumer spending has been hurt by the high gas prices. Analysts and politicians continue to debate on possible solutions to the problem. Lately it seems that arguments for extra taxes are consistently on the table. Now comes an argument that the US should raise gas taxes to the same as Europeans, which would possibly help American consumers.

The basic argument is that if the U.S. were to adopt the same taxing structure as Europe, gas taxes would significantly rise, but there would be more money for public programs. Higher prices would force consumers to drive more fuel-efficient cars and drive less, which would mean less money for oil firms (Lower demand would lower the wholesale prices). The extra money from the taxes could go to improving mass transit, lower health insurance costs, more student loans, etc. Basically the extra cost of fuel would go back to the American public rather than greedy oil companies.

Current taxes in the U.S. are generally lower than 40 cents a gallon, so an extra $1 or $2 per gallon would be significant. This may force consumers to drive less, buy fuel-efficient cars or move closer to city centers, but what would be the effects on poorer consumers that can’t afford the extra gas taxes? Not every consumer can afford to buy a new fuel-efficient car or to move closer to city centers, since property is usually more expensive there.

It would be great if the fantasy of lower wholesale prices and more money for government spending came true, but it doesn’t seem like it will work. These new taxes may cause more harm than good to the average American consumer.

Full Story: CNN Money

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