Talk of Raising Gas Tax Is Just That

But for now, Paulson has left a gasoline tax increase waiting in the wings.

One illustration of political gridlock on the issue is a new Council on Foreign Relations task force report on how U.S. dependence on oil imports undermines U.S. foreign policy. The group agreed that there is a big problem but couldn't agree on how to curb gasoline consumption.

The report listed three approaches: raising gasoline taxes; setting tougher automobile fuel-economy standards; and imposing a nationwide ceiling on gasoline consumption, with people allowed to buy and sell rights to use more than their annual allotments.

"No strategy will be effective without higher prices for transportation fuels or regulatory incentives to use more-efficient vehicles," the report said. But the task force didn't say which of the three it favored and it didn't say how much a tax might be.

Holtz-Eakin, a member of the group, said new efficiency standards would have a delayed effect on consumption because it takes time for auto companies to retool and for people to buy new cars. A higher gasoline tax would have an immediate as well as a long-term effect.

But other members of the group, including Martin S. Feldstein, a Harvard economics professor who was chairman of President Ronald Reagan's Council of Economic Advisers, and Charles J. DiBona, former president of the American Petroleum Institute, vigorously oppose gasoline taxes.

"It was not possible to get a consensus," said James R. Schlesinger, a co-chairman of the task force.

Schlesinger, who favors a tax on imported oil, said, "I still have some black and blue marks from 30 years ago," when he was energy secretary for President Jimmy Carter, who proposed a 50-cent increase in federal gasoline taxes. "We were laughed out of the Senate," Schlesinger recalled.

A one-cent federal gas tax was first imposed in 1932. An increase to 9 cents a gallon from 4 cents a gallon was approved by Reagan on Jan. 6, 1983. On Nov. 5, 1990, a reluctant President George H. W. Bush signed a deficit-reduction compromise with the Democratic-controlled Congress that increased the federal gas tax by 5 cents. The budget bill of 1993, signed by Clinton, increased the tax to its current level.

The politics of a gasoline tax involve two key issues: what to do with the money and how to address the fairness of the tax.

Most of the tax goes to a trust fund used to build highways, which advocacy groups say undermines conservation goals by encouraging more driving. Energy-policy experts say any extra tax money could be used to promote alternative energy or energy-efficiency programs. Because a gasoline tax, like a sales tax, disproportionately hurts low-income people, who pay a larger percentage of their earnings for basics such as fuel, other experts argue that the additional money should be used to give offsetting tax breaks to low-income families.

This year, some new proposals have emerged for limiting gasoline consumption. Lugar has proposed that the government set a $45-a-barrel price floor for crude oil, partly to encourage investment in alternatives such as ethanol.

Feldstein favors giving every adult credits on a debit card but capping the overall consumption level. People could sell spare credits or buy them as needed. Oil companies would be clearinghouses for the program.

Mankiw responded online: "Do we need to create a new administrative bureaucracy because politicians are afraid to use the word 'tax'? I hope not."