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Ford CEO Alan Mullaly came out publicly in favor of new fuel taxes in place of fuel economy standards as a way to reduce fuel consumption. At the Management Briefing Seminar in Traverse City MI this week he called CAFE a failure that has done nothing to reduce American dependence on foreign oil or greenhouse gas emissions. Instead he said that Congress should give consideration to Rep. John Dingell's (D-MI) recent gas tax proposal.

While Mullaly is correct in arguing that oil imports have only increased since CAFE went into effect, there is also the fact that the standard has not risen since it reached its current level in late 1980s. However, the reality is also that consumers in this country will also tend to buy the biggest, most powerful vehicle they can afford to operate. Why else would F-150s and Explorers outsell by such a wide margin small cars that are and have been available.

Sales of larger, thirstier vehicles have only slackened as gas prices have risen but not nearly enough. Only when the cowardly politicians actually step up to the plate do what needs to be done to address demand for oil with tax changes will the problem really be addressed.

[Source: Detroit News]


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  • 13 Comments
      • 7 Years Ago

      CAFE standards do not dictate what car companies are allowed to build, it only dictates how many of each they are allowed to sell. It's perfectly feasible to increase CAFE standards and still have the 10mpg bloated barges that some people like to drive, but the companies that sell them will be forced to structure pricing such that for every one of those that is sold, 10 cars that get 40 mpg are sold (or whatever the numbers are). It's the CORPORATE AVERAGE after all. That may require that $20,000 is added to the price of the barge, and $2000 is deducted from the price of each of the 10 small cars. CAFE may be a more structured implementation of national energy policy than raising gas tax, but from the car buyer's point of view it will still just be a matter of how much you choose to pay for your status-mobile.

      That being said, I like the idea in increased tax on gasoline, but I think Owen is incorrect thinking that the rich would bear most of the brunt. My understanding is that it is the poor and lower middle class who, because they have fewer choices about where they can afford to live, in general have further to commute. Have you noticed how expensive it is to live in the city?
      • 7 Years Ago
      Fuzzy, Lower income families tend to buy the cheapest vehicle on the lot, regardless of mileage, which nowadays are SUVs because of their low demand. Something like only 25% of people in this country pay taxes. My tax dollars are going to low income families checks so they can go buy a Durango. I don't like that, do you? Maybe we should get them a job instead, maybe the tax money generated by the gas tax can go to fund things like infrastructure redevelopment, alternative fuel research and development and public transportation infrastructure and subsidies. All of which could generate jobs. Maybe, just maybe the guy commuting alone for 2 hours in his Sequoia to his job in the city from his house in the suburbs should deserve to pay the tax, vs. the lower income family who lives in the city and can take advantage of public transportation improvements. Now I know I'm making some overgeneralizations, but that's how I see it in my neck of the woods.

      What we need are more middle class jobs instead of blindly increasign the handouts we give to the lower income families. My father worked for 45 years to support his family before retiring, why shouldn't anyone else have that opportunity. Instead the EPA regs will cause the closure of more middle class job plants (and the plants that supported them) whose vehicles didn't make the cut (yet were in demand) and when they bring in a new model that does meet it, you can rest assured it won't be made in the USA (Dodge Hornet, Chevy Aveo anyone?) These regs will perpetuate the deeper social problem that this country has more so than a gas tax has the potential to.

      The market should determine which cars are in demand, if our government wants to get it's nose involved, then it should change what is in demand, not what is available. People should be allowed to drive whatever the hell they want, if in 20 years from now, they want to buy an electric car because they are now available thanks to the R&D money that gas taxes generated, they can, if they want to buy a low emmissions gas hog that gets 10mpg at $10/gallon with the carbon offset paid for via the gas tax, they should be allowed to.
      Thats all I'm sayin'.
      • 7 Years Ago
      What a typical RRW comment....the people who are doing the most to conserve fuel, i.e. lower income, driving smaller cars, raising families, again will get the shaft.

      Higher taxes will only be a reverse penalty to the lowest incomes, plus does nothing to force auto manufactures to produce more efficient vehicles to give any of us a choice.

      This move only, and again, benefits the highest incomes. Welcome to the status quo.

      Go away.....
      • 7 Years Ago
      Guess it depends on which city and that's why public transportation to the suburbs is necessary. I don't think it's the rich that will bear the brunt so much as gas guzzlers. If you can't afford to live in the city and have to commute to live, then you can't afford commuting with a car that gets bad gas mileage, and hence you would buy a more fuel efficient car, hence creating demand for a more fuel efficient car or public transportation... The big issue in my mind is that a gas tax would probably not go to fund public trans, Alternative fuel R&D or infrastructure improvements, but most likely would go to fund social programs seeing as how the next president will likely be a democrat judging by the last election and judging by how people haven't taken notice that the latest group of democratically controlled representatives have been no more or even less effective than the previous batch. We're screwed either way because people will blindly vote by party.
      • 7 Years Ago
      @ grimmex -

      nobody likes paying higher taxes, but the extra revenue could be used to fund tax cuts elsewhere, e.g. via a flat tax credit for every 1040 filed (x2 if filing jointly) or, a reduction in general sales tax. The latter would be the more neutral option.

      The objective shouldn't be to increase tax revenue but rather a lateral shift. Sufficiently high taxes do work given enough time, witness the fact that the actual European and Japanese vehicle fleets get much better mileage than the one in the US. Consumer demand patterns adapt to market externalities and, technology to better meet those patterns gets developed.

      Besides, the true cost of low fuel prices in the US is being borne by future generations - who do you think is footing the bill for Iraq?

      • 7 Years Ago
      You know why politicians are chicken to raise gas taxes? Because the American public hates it when the price of gas goes up. That hatred is bad enough when the cause is something people can't control - a hurricane or a shortage of gas for instance. But it's much worse when someone does it on purpose - when Saudi Arabia embargoed the US in 1972, for instance.

      Imagine what happens to elected politicians when *they* make that happen. They lose their jobs. Would *you* do something at work that you *know* would get you fired?
      • 7 Years Ago
      Oil consumption has go up because more people are driving more, not becasue CAFE is a failure. Urban sprawl has forced more people to increase the lenght of their daily commute thus increasing gas consumption. If CAFE would be updated every couple of years instead of every 25 years it would be easier for the auto companies to comply and reduce the BS that coming out of the mouths of ass holes like Mullaly and Dingell
      • 7 Years Ago
      You can't use gas prices to make people buy smaller cars. Sure, it may be more fuel economic for people to drive small cars, but what about large families who couldn't dream of fitting all of their family members in a focus? Or how about someone like myself, a self-employed music teacher who struggles with gas prices only at $3.20/gal by providing my customers the best service that I can, by having what I need with me at all times (requiring a large vehicle, minivan specifically) at their doorstep within a 50 mile radius of my house? Sure, I could just let the gas prices win and go out of business and get a real job, buy a small car and everyone's happy, but then that would be another good, convenient service used to improve the life others simply gone to waste.
      • 7 Years Ago
      There are virtually no politicians who would be willing to raise taxes to the level that would be required to influence consumer behavior. Considering that the natural increase in fuel prices is about 20 or 30 cents per gallon each year, you'd have to raise taxes significantly more than that to think that you're actually inducing people to buy more efficient cars.

      I read recently that the federal gas tax hasn't changed since about 1992, and my state gas tax hasn't gone up since 1988 or '89, so it should probably go up fairly significantly (perhaps 20 cents) just to pay for inflation.
      • 7 Years Ago
      Given that people are buying more gas at three dollars than they were at two dollars, we're going to pay more for gas. The only question is what happens to the money. Should it go to Bush's friends or should it go to addressing some of the long list of problems we face? One of which is developing alternatives to petroleum which will stop exporting our wealth to our enemies.
      • 7 Years Ago
      "Why else would F-150s and Explorers outsell by such a wide margin small cars that are and have been available?"

      Pricing structure? (I could be snide as say Ford Pinto.)
      • 7 Years Ago
      "Higher taxes will only be a reverse penalty to the lowest incomes, plus does nothing to force auto manufactures to produce more efficient vehicles to give any of us a choice."

      You have absolutely no understanding of basic economics. Please go take Economics 101.

      As the price of gas goes up, people will demand more fuel efficient cars. We've already seen this effect with $3/gallon gas -- SUV sales are tanking and small car sales are up. With the demand for fuel efficient cars going up, manufacturers are trying to offer more fuel efficient cars.

      You can't get people to buy what they don't want. That is the basic failing of the CAFE standards. What you CAN do is to use basic economic theory to change what people want.
        Turbofrog
        • 3 Months Ago
        "You can't get people to buy what they don't want. That is the basic failing of the CAFE standards. What you CAN do is to use basic economic theory to change what people want." By your own logic, the automakers can simply price their gas-guzzlers much higher, creating an incentive to buy more affordable cars that happen to meet CAFE standards. Basic economic theory.
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