9/20/2012
By David Silver, Research Analyst

More Articles by David Silver

We all know that the deficit and lack of taxes is a problem, but do we really think that raising the gas tax is the best way to go about fixing the problem?  Making the rounds on Capitol Hill and through state governments is the possibility of increasing the gas tax.  Right now, the average American pays approximately 48.9 cents per gallon in gasoline taxes.  For comparison, Hong Kong residents pay $6.06 per liter (about $1.60 per gallon), India pays $0.61 per gallon, Germany adds approximately $8.10 per gallon, and Great Britain residents pay approximately $3.54 per gallon.

As Americans, we already pay much fewer taxes on the fuel we use; however, as vehicles become more fuel efficient and hybrids and electric vehicles become more widespread, the usage of fuel is going to continue to decline.  As a result, the amount collected via taxes will decrease.  Is the fix to this more gasoline taxes?  My response would be no.  Take away the subsidies – or some of the subsidies – for purchasing a hybrid or electric vehicle.  If these cars are that cost efficient, smart consumers will purchase these vehicles anyway. 

This talk has come from both sides of the aisle in Washington D.C., and it's even more of a bipartisan rumor on the state level.  A portion of the money that was generated through the gas tax goes to help maintain and or rebuild roads, bridges, tunnels, etc.  However, more of the money that could be used to fund "shovel ready" projects rather than being spent through subsidies to help hybrid and electric vehicle sales.  I don't have a car in New York City, but I was driving around with my parents this past weekend and was "lucky" enough to be in the car when each of their cars needed to venture into a gas station.  It was painful! Gasoline prices have increased dramatically over the past year, as the cost per gallon of gasoline has increased by (on average) $0.277.  Since the beginning of August, prices at the pump have increased 6%. 

There are talks about a "usage tax."  People that are driving more already pay a usage tax.  They pull into a gas station more than once a week, that is taxing their wallet.  That is taxing how much disposable income they have.  So nix the usage tax, and nix the increase to the gas tax in general.  Get rid of the subsidies and fix up our roads and bridges with the money that we already have in the coffers.  Those jobs will yield benefits too, even if they are temporary.

David Silver
Wall Street Strategies