Read Bernie’s Lips: No New Taxes*

By Kevin D. Williamson

Tuesday, June 22, 2021

 

Here is one you may have not seen coming: One of the holdups on that ridiculous $1 trillion infrastructure package currently idling in Congress is the fact that — picture me double-checking my notes here — Republicans want to include a tax increase, while Joe Biden and — really! — Bernie Sanders oppose it.

 

Strange days, indeed — most peculiar, mama!

 

Republicans have put forward the possibility of indexing the gasoline tax to inflation. Currently, the federal gasoline tax is structured as a flat fee of $0.183 per gallon, a rate that has been preserved in amber since Ye Olden Days of 1993, when gasoline went for an average of $1.11 per gallon. Put another way, in 1993 the federal gasoline tax was about 16.5 percent, whereas today it is about 6 percent. Indexing the tax to inflation is one way to go about rationalizing it, but a far simpler thing would be to calculate the tax as a percentage, which would keep it stable in relative terms even as the price of gasoline goes up and down, as it so often does. We already do that with sales taxes of other kinds.

 

Funding roads and bridges and such with a gasoline tax is an old idea and based on the principle that the people who use the roads are the people who should pay for them. That is fine as a principle, I suppose, but there isn’t really much reason to believe that it holds up as a matter of practical fact: We all use the roads, because we all move around, use products that are trucked from place to place, live in houses made of things that were not simply gathered up from the construction site, etc. When Amazon puts a tank of gasoline into a delivery van, it doesn’t just eat the expense, and (forgive me for repeating this point yet again, but it is important) it doesn’t necessarily just pass the cost on to consumers, either, because Amazon has to compete, just like any other business, and if it jacks up prices too much, shoppers will go elsewhere — and so it passes on its costs to everybody else as best it can: its employees and vendors, businesses that sell on Amazon, service providers, etc. In that way, we all pay taxes together. You should think about that when Senator Sanders talks about raising taxes on “the rich” — the rich are, for the most part, pretty good with money, which is why they are rich. A tax on Jeff Bezos or Exxon is, ultimately, a tax on you, Sunshine.

 

A higher gasoline tax will get passed on throughout the economy pretty easily, which is one reason it’s not a terrible tax.

 

Raising the tax might also create some incentives for individuals and companies to pursue greater fuel economy, though history suggests that gasoline prices have to get pretty high before Americans start passing over trucks and SUVs for economy cars. A high-enough gasoline tax might even create an incentive that would get people to choose electric or alternative-fuel cars — and Republicans can’t have that, so they’d prefer to include an equivalent fee on electric cars, too. If your big issue is environmental externalities, you can go chasing those all over the world and never really get it very well sorted out. Electric cars are far from carbon-free, but powering cars with electricity generated at a natural-gas (or nuclear!) generating plant produces a lot less carbon dioxide than does running dinosaur juice through a V-8. But a tax on electricity would have similar effects to those of a gasoline tax, creating incentives for energy efficiency and being spread out through the economy through the magical effect of nickel-and-diming consumers, workers, and business partners.

 

The problem with a higher gasoline tax — the problem for President Biden and for his congressional allies — is that people notice higher gasoline prices, and they hate them. They will look for someone to blame, and they will find someone. They’ll also notice when Amazon or GrubHub raises delivery fees — often, companies go out of their way to explain to consumers why they are raising prices. “Don’t blame us!” says the memo from the marketing department.

 

We mostly fund the federal government from taxes on income. We tax wages and salaries, we tax corporate profits, we tax gifts and inheritances, we tax investment payoffs and dividends, etc. There’s no particular reason we have to fund the federal government that way, and the policy world is full of just very very very enthusiastic people who will explain to you the merits of some other tax regime. They all have the same problem, which is that every man-jack ends up thinking he is paying too much while the other guy is paying too little.

 

For the past couple of weeks, we have been treated to a just astoundingly stupid series of breathless reports and vitriolic denunciations from people who are scandalized that there are some famous Americans who do not pay very much income tax because they do not have very much taxable income. Jeff Bezos is notionally the wealthiest man in the world, but it’s not like he’s got $200 billion in his Chase Sapphire Checking account. He owns a big piece of Amazon, and his net worth is approximately whatever his shares are worth right at this second. If he wants to convert that on-paper wealth into money he can spend, then he has to sell some shares, at which point he pays taxes on his capital gains. If he gets dividends, he pays taxes on those — and the dividends are paid out of funds that already have been taxed as corporate income. Most reasonably well-informed people understand this, but the angst and wailing and howling never stops, anyway, because it just seems wrong to people. But if you adopt some other tax system, it’s going to seem wrong to a lot of people in six months, too. That’s not a revenue problem — that’s a human-nature problem.

 

That being said, there’s a case for having several different sources of federal tax income — diversification is prudent — and for having an updated version of the gasoline tax as part of that mix. The case against raising or indexing the gasoline tax is purely political — President Biden doesn’t want to be blamed for it.

 

Something is going to get worked out, though, almost certainly — because almost everybody in Washington is itching to spend that $1 trillion or more. Senator Lindsey Graham (R., Slytherin), addressed the president directly: “President Biden: If you want an infrastructure deal of a trillion dollars, it is there for the taking, you just need to get involved and lead.” It would be helpful as a political matter if the president got involved, but perhaps Senator Graham could be reminded that the Senate is its own thing, and it can pass whatever kind of bill it wants. It can even override the president if he doesn’t like it. The lawmakers ought to, from time to time, make law and act like they’re in charge of it.

 

But I must confess that the libertarian in me is enjoying the prospect of a $1 trillion slop-bucket being derailed by a 5-cent tax hike.