Mulally not proposing a gas tax - but he's not against it
The hallmark of the environmental debate is that there are so many important players on so many different sides. Eminent scientists and intellectuals have taken every side of the debate, challenging their eminent colleagues. When it comes to the two most involved and highly charged players, the automakers and politicians, things get even more curious. On the same day that Bush opposed a gas tax to give states more money to repair bridges, Alan Mulally said he supports the idea of a gas tax to encourage customers to buy more fuel efficient vehicles.
Mulally believes Congress' CAFE standards represent failed policy and has hurt automakers. Regulating fuel efficiency has, in his opinion, only lead to consumers buying more cars and driving more. While making sure to stress that he and Ford are all in favor of fuel efficient vehicles and environmental health, he wants some of the onus put back on consumers. He said, "I just think it's so important that we all join in this debate and we really decide what we want to do about energy security and global warming. A piece of that could be a tax."
[Source: Detroit News]
No matter what you think of a gas tax, there seem to be a few unexplained pieces in Mulally's argument. If he's open to the idea of a gas tax to influence consumers to buy more fuel efficient cars, using the European example, it isn't clear how that's supposed to help automakers. The reasons Europeans buy fuel sipping cars go far beyond just the price of gas, and car companies don't get any of that money. Or is he just asking Americans to give Ford a reason to build cars with better mpg? If American customers buy more Focuses than Explorers, how does that help Ford? or is that consumer-driven efficiency simply meant to give Ford reason to put more resources into fuel efficient vehicles in general (and not just the Focus)? The debate rages, curiouser and curiouser...
Reader Comments (Page 1 of 2)
Robert 6:17PM (8/09/2007)
From an economic perspective, a gas tax slowly phased in ($2 over 15 years, for example) and managed correctly (small tax breaks for working poor; reinvestment directly into specified areas or put towards national debt and not porked out like a lot of our new revenues) is the best way to lower demand of gas without damaging our economy. There are going to be inefficiencies with the government regulating the process, but it would be far more efficient than CAFE or any other proposal I've heard. It also might help prevent against shocks to oil price and lower our exposure to geopolitical instability depending on the size and scope of the tax.
Whether or not Mulally should be dabbling in this field is debatable, but if politicians really understood what raising CAFE meant (dead-weight economic loss even in the long run), they might think twice about their approach and consider his statement as a sound economic approach.
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Cidny 6:54PM (8/09/2007)
Rob, you don't seem to approve of the strong-armed tactics to steer car-purchasing and manufacturing, but what do you think of the $12,000 tax-break that comes with a Honda Hydrogen Fuel-Cell car? http://cardevotion.com/Article/209/headline.html?ref=st My thoughts are that it's an excellent way to encourage those with money to throw at the wind, to throw it at the winds of change-for-the-better.
Robert 7:25PM (8/09/2007)
I don't see a problem with tax breaks on fuel-efficient vehicles or vehicles that use alternate energies. However, it is always going to be a revenue negative process - meaning, the refunds we are sending out have to come from somewhere (usually from nowhere, creating more debt). There is also the question of: have our demands actually change. If they haven't, if we're just paying out potentially billions of dollars to get people to drive what we want them to, nothing will have been accomplished except the increase in our debt without removing some of the risks associated with scaling new technologies based on real demand.
There has also been an idea floating around of taxing fuel-thirsty cars and refunding for fuel-efficient ones. The difficulty there is that people will demand exceptions for necessity (some poor family with six kids might NEED an Expedition, for example), and I'm sure someone will scratch someone's back to and their "necessity" written into law (hence our SUV tax rebate for doctors, for example).
You also have to be sure that any kind of discounting you do doesn't keep the technology from actually being viable. Hybrids are still losing lots money for all companies. Toyota is probably best off because they are mass producing them on huge scales now. They were doing ok because the government gave you a big discount for buying them and most people would pay sticker. Now, it doesn't, and fewer people are willing to pay sticker. So, Toyota has to boost sales in order to keep it economically viable. You will notice that Toyota's gamble is to get prices (or perceived prices) lower so that consumers will purchase more and allow them to scale to protect themselves. This is a dangerous gamble, though, especially with lower EPA numbers coming and flat gasoline prices (for now) that will probably hurt consumer perception. I think they will ultimately be successful, but you can't do this for every technology.
A gas tax is much simpler and one of its benefits can be to companies that produce cars that exceed mileage standards or emissions goals (or use new technologies). The outcome of a gas tax, however, is to FUNDAMENTALLY change consumer behavior. Providing tax rebates doesn't fundamentaly change it. It can be a part of the solution, but it's not a long-term solution.
So, short of it, I think those tax incentives are fine. Long of it. Gas tax is better for what we really need to happen. And you have to think of it not that we're jacking up prices over night but that it phases in so that automakers and consumers optimize their offering and bundles. We use revenues to invest in public transit infrastructure and alternative energies. The result is more choices, lower prices for new technologies, new jobs created in growing feilds without shocking the economy. It gives everyone time not only to adjust but decide what is the right balance for them. And it keeps it that way without the government continually paying out incentives.
naggs 7:59PM (8/09/2007)
+1
its rare to see any comments under a post like this that are logical and reasoned
Greg A. 7:04PM (8/09/2007)
For years, automakers have periodically proposed an increase in gasoline taxes as an alternative to CAFE. It's not because they truly believe the former is better policy (either for the nation or their industry) than the latter but because they know there's no way the public will stand for it. Thus, they get to look like concerned members of society without actually doing anything.
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naggs 7:59PM (8/09/2007)
they are opposed to cafe, because they know that there are better ways to encourage americans to conserve fuel. the choice B that they back from time to time changes with public opinion and the economic reality.
personally, i am all for a 'feebate' system. where non commercial vehicles that get worse than the median mileage have a fee that subsidizes the cars that get better than median mpg... that has a cushion built in because people can finance the fee into their new large car all while creating an arms race of more and more efficient vehicles trying to get a larger and larger piece of the 'feebate' pie. it is a market solution that doesn't cost taxpayers as a whole a dime while improving fuel efficiency across the board. plus those who want a daily driver f150 who can afford it can still drive what they choose.
what has to go is this idea that its GM/Ford/corporations fault that cars get bad mileage. it was the market that drove their product portfolios to where they are now and only a market solution will move the average mpg to a healthier place without doing irreparable harm to US industry.
Louis Duran 10:19PM (8/09/2007)
"For years, automakers have periodically proposed an increase in gasoline taxes as an alternative to CAFE. It's not because they truly believe the former is better policy (either for the nation or their industry) than the latter but because they know there's no way the public will stand for it."
Hammer meet nail... I think you just nailed it. Reading between the lines, it sounds like they want the impetus for more fuel efficient cars to come from the consumer not from a CAFE mandate. I think that is the right way to go about it. As much as I would like to see the US federal govenment make oil consumption more expensive, I don't see that happening while Bush/Cheney are in office. I would support a higher federal gas tax since my next car will hopefully get at least 30 mpg.
Jared 8:07AM (8/10/2007)
"For years, automakers have periodically proposed an increase in gasoline taxes as an alternative to CAFE. It's not because they truly believe the former is better policy (either for the nation or their industry) than the latter but because they know there's no way the public will stand for it."
Bull. The basic fallacy of CAFE is that you can't force customers to buy cars they don't want to buy. What you CAN do is change what people want to buy. You do that by raising the price of gasoline. When gasoline cost $2.00 per gallon, people were happy to buy SUVs that get 15 mpg. Now that gas is $3.00 per gallon, those same SUVs are sitting on the lot -- because people now want to buy fuel efficient vehicles.
The best and simplest way to increase the fleet economy of vehicles in the US is to work WITH market forces by raising the gas tax. Demand for fuel efficient vehicles will go up, and the manufacturers will meet that demand.
Greg A. 7:09PM (8/09/2007)
"The reasons Europeans buy fuel sipping cars go far beyond just the price of gas"
So, what other reasons do they have? I can think only of the fact that the typical European driver does a lot more urban driving than highway driving, so even if the price of gasoline in Europe were the same as it is in the U.S., the typical European driver would want a car that gets better city mileage than the car a typical U.S. driver would want.
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naggs 8:07PM (8/09/2007)
the average distance that a european lives from work is much smaller than in the US.
fewer people employed in the construction sector who need work trucks to transport large objects long distances.
americans are on average much larger people than europeans.
much more space for parking in the US allows for bigger vehicles.
more time spent stuck in traffic leads to cup holders, automatic transmissions, and other features that rob mileage.
lots of reasons...
karotonik 9:37PM (8/09/2007)
"the average distance that a european lives from work is much smaller than in the US."
That means they would tolerate a car with worse mileage than an American would.
"more time spent stuck in traffic leads to cup holders, automatic transmissions, and other features that rob mileage."
Cupholders rob mileage? LOL. I thought traffic in big European cities is just as bad as it is in the U.S. and they drive stick shifts anyway.
Robert 7:35PM (8/09/2007)
No, the answer is demand versus supply. Automakers build what is in demand - what will get them the most money. CAFE is a risk to that because if you tell everyone that trucks must now get 30 mpgs, most companies will scale back their truck business. Consumers who need trucks (commercial industry for one) will have to pay very high prices because of lower supply and potential fines. Consumers, less enthused with offerings will slow their purchase of cars somewhat without boosting revenues per vehicle. The result would be billions in losses for the automakers, thousands of lost jobs, and consumer demand potentially unchanged.
If you hike gas prices slowly over time, consumers will demand more efficient vehicles and pay more for them. Automakers could then adjust their offerings without as much risk because gas prices would be permanently higher. Right now, though, you still make thousands on pick-ups and SUVs and barely break even (if you do) on small cars. So, small cars are higher risk.
It's not such a cynical reason as "they can propose something without ever having to worry." They look at everything from a business risk perspective. And, in this case, they are probably right.
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Me 7:42PM (8/09/2007)
Yeah, 1 / 20th of the money currently going to Iraq would easily cover the cost of rubuilding infrastructure like roads and bridges. The heck with this clown and his support of gas taxes so only the very wealthy will have the privlidge of driving on American roads. The consumer is taking it enough with the current gas prices, oh well one more reason not to buy a Ford!
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Jim 8:40PM (8/09/2007)
Most people are still going to drive, very wealthy or not. They'll just adjust their budget. Anyone who pays attention can't say they never dreamed of $3 gas, so if you've stuck yourself with a guzzler, don't blame someopne else. Limited supply + rising world demand = higher prices. Learn and make better choices next time. And a gas tax might help some people learn. One more reason to buy a Ford, perhaps.
dan 12:47PM (8/10/2007)
1/20th of the money going to Iraq would be about 7 billion dollars this year.
The most recent federal highway spending bill was $275 billion dollars. For every dollar the feds spend, state and local entities pay about four dollars more.
A couple billion more would help but don't pretend it's a choice of one or the other.
naggs 8:15PM (8/09/2007)
i agree with you on most points except the supply and demand argument
large trucks are not a finite resource so they do not respond to the same laws as say, oil.
sure there are economies of scale, but those affect maybe a few hundreds of dollars per vehicle above a certain threshold which we are way above.
cafe increases the price of trucks because for a full size truck to avg 30 mpg, it would have to be a diesel-hybrid with an aluminum frame and body. all that would add about something like 10 k to the price of the truck. so for the automaker to say under the fleetwide cap, it has to either sell fewer large vehicle, more small vehicles or lots of very expensive large vehicles.
cafe doesnt work because it doesnt make economic sense for the consumer to buy efficient products. only an incentive that influences what the buy buys will help.
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DamnTough 10:11PM (8/09/2007)
I think this is a very elegant solution. Let’s carry the concept a little farther. Imagine a flexible gas tax that would automatically adjust to keep the price of gas somewhat stable. We would no longer have the huge price swings.
Let’s also entertain the possibility of using the revenue collected to further reduce our dependency on foreign oil. The money could fund a hydrogen infrastructure. It could fund better batteries for plug-in hybrids. After we fix the auto industry, we could use the revenue to fund wind and solar energy production.
The best thing would be to publish gasoline prices into the future. Then the automakers could predict the buying public’s needs and build vehicles to meet the new reality of much higher fuel costs.
If this concept works with autos, why not implement it for coal and natural gas as well?
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RockStoneSteel 10:59PM (8/09/2007)
Necessity is the mother of all invention. No need to heap more manipulative taxes on the public. The cost of fuel will naturally go up as it becomes scarcer and more expensive to drill and refine. The alternatives to fossil fuels will become self evident as the need arises.
Everyone whines and complains when the oil companies get rich from selling oil, but the fact is, they invest a LOT of money in exploration, pumping, refining, and delivering the fuel from well to pump. On the other hand, the government makes at least as much profit through the current gas taxes, but adds absolutely no value to the process.
There is no need for manipulative taxes that only serve to further increase spending and the government's sense of entitlement to our money. Another problem with the gas tax is that it is prohibitively expensive for the lower income. A person making minimum wage and driving 20 or 30 miles each direction to work each day, will have to work about an hour simply to pay for the fuel used in that commute. That's just not reasonable.
So let the oil supplies dwindle and the alternatives will come on line much faster. If we are worried about the pollution from vehicles, then simply continue to raise the emission control standards.
Just stay out of my wallet.
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John Metcalf 10:40PM (8/09/2007)
I hate to say it, but the discussion here makes sense in the long run because obviously neither American consumers or automakers can see past next Tuesday to the needs of the future, and they haven't been able to for the last 15 years.
The American consumer should be punished a bit for their lack of insight. The working class family who bought that used Durango (there were four on the lot, cheap) instead of the more fuel efficient Accord (high resale value kept it out of reach) should take the hit.
Sorry guys, even though I'm for higher gas taxes, I'm utterly suprised at the complete pass the US auto industry is getting here for not having the good business sense to not put the majority of their eggs in one basket. Are they completely blameless? Shouldn't they have to step up to the plate at all?
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Mr. Slice 11:19PM (8/09/2007)
While I think that the U.S. auto industry is somewhat to blame, it's fair to say that they couldn't build enough SUVs to satisfy demand during the late 1990's/early 2000's. They knew that gas prices would rise, but I don't think anyone was expecting it for at least another ten years.