A BLUFF AND opinionated veteran of the sharp-elbowed private-equity business, Dan Akerson has not exactly avoided controversy since taking over as chief executive officer at General Motors. So it’s not surprising that he would blurt out his view that the U.S. government ought to increase gasoline taxes by 50 cents to a dollar per gallon. As a means of promoting energy conservation, Mr. Akerson told the Detroit News, a higher tax would be far more cost-effective than the byzantine fuel-efficiency regulations we have now. This recommendation was a clear violation of well-established political rules, and the anti-tax referees promptly whistled Mr. Akerson for a flagrant foul. “Ridiculous,” fumed Republican presidential candidate Tim Pawlenty.
The head of a taxpayer-supported but profit-pursuing enterprise may not be the ideal spokesman for higher taxes. But that's hardly a substantive objection. And in substantive terms, Mr. Akerson is 100 percent correct. Properly designed, a substantial increase in the federal gas tax would accomplish widely supported public policy goals more fairly and at less cost than the current alternatives.
Want to reduce the burden of debt on our children and grandchildren? The Congressional Budget Office says that a mere 25-cent increase in gas taxes would cut the federal deficit by more than $291 billion over the next 10 years. Remember: The federal gas tax has remained constant at 18.4 cents per gallon since 1993 (and has therefore been declining for almost two decades, in real terms). So to some extent an increase would be equivalent to repealing an expensive tax cut.
Yes, like all excise taxes, the gas tax is regressive. But that could be mitigated by a means-tested system of rebates. Perhaps now is not the time for any tax increase, since the economy is sluggish enough already. Fine. Phase the gas tax in as crude oil prices retreat from their recent highs, or offset it with temporary tax cuts elsewhere.
Want to cut air pollution, traffic and U.S. dependence on Middle East oil? A higher gas tax is a direct route to all three objectives. Indeed, by permanently dampening demand for gasoline in the United States, a higher tax would exert downward pressure on the world price for crude oil, which means it would partially pay for itself. Not only that, but a greater share of what we pay at the pump would be flowing into U.S. government coffers, rather than those of Saudi Arabia.
Certainly, a gas tax is a more efficient and transparent means to these ends than federal corporate average fuel economy (CAFE) regulations, which in their latest incarnation require automakers to produce a fleet averaging 34.1 miles per gallon by 2016. The last time the CBO compared the costs and benefits of that policy to increasing the gas tax, it found that a 10-cent tax hike would save as much gas as raising CAFE 3.8 miles per gallon — but at substantially lower cost.
CAFE imposes its visible costs on carmakers, which is why politicians like it — and Mr. Akerson doesn’t. When it comes to higher gas taxes, what’s good for General Motors might really be good for America.