AutoNation CEO Says Time is Right to Pump Up Gas Tax
By George Anderson
The high price of energy and related topics, such as America’s dependence on foreign oil and the environmental impact of carbon fuels, are hot topics in the media, around water coolers and elsewhere these days.
It is also a topic of deep concern and discussion in auto related circles. The high price of gasoline has already begun a shift of sales away from big SUVs to more fuel-efficient vehicles. This trend began even before Katrina hit as the American driving public faced the reality of escalating prices at the pump.
Now, the chief executive of the nation’s biggest retail automotive group says Americans are not paying enough at the pump and it’s time to raise taxes on fuel.
In an editorial in Automotive News and then again in a television interview, Mike Jackson, CEO of AutoNation Inc., proposed an increase of about 10 cents per year for 10 years on each gallon of gas sold at retail.
“The goal of this proposal is not to raise taxes but to change the consumer mind-set,” he wrote.
Mr. Jackson believes higher taxes will help convince more Americans to make purchases based on fuel-efficiency rather than other factors.
According to a Sun-Sentinel report, the current federal tax on gasoline is 18 cents a gallon. In Europe, consumers pay about three dollars in tax for every gallon of gas they purchase.
Moderator’s Comment: Should the entire retail industry get behind the proposal of AutoNation’s Mike Jackson to increase the federal tax on gasoline by
a dime a year over ten years? How are retailers reducing their dependence on carbon fuels? –
George Anderson – Moderator
I don’t think most of us opposed the gas tax when it was used to build the interstate highway system. Politicians are prone to start spending taxes on their favorite projects. If the taxes were given over to an independent commission and actually spent on energy-related items, then most people would be for it.
Maybe that is the best idea; get rid of Congress who is supposed to do this in the first place and replace them with independent commissions. Maybe take some of the politics out of the current situation. The last Energy and Transportation Bills were nothing but pork, then deep fried and dipped again.
We need to get serious about energy, transportation and health care.
I don’t know if it will happen in 10-cent-a-year increments, but I’d be amazed if the tax on gasoline weren’t $1 higher in 10 years. Clearly, something has to give. If we could take the extra tax money and devote it entirely to research on new energy forms, and efficiency, great. But the lobster will whistle on the hill before that happens. Research on efficiency is key. I know retailers who are spending big bucks on energy efficiency (especially in energy-efficient refrigeration units) but they always face a choice: do I spend the big bucks now on the new energy-efficient model, or much less up-front on the standard units offering less efficiency? You could even take some of that wonderful new tax money 🙂 and put it into a pool businesses could draw from in making these decisions. Up here in socialist Vermont, the state has incentives to homeowners installing solar panels on their roofs. (I think it was Jeffords’ idea.)
Many bold moves are necessary if we are to break the cycle of excess gasoline consumption. In Europe, consumers have been paying much more for fuel than we have for many years and consequently you don’t see people driving around in parade floats that get 10 mpg. I saw the zip car in London a few years ago — an 8 foot vehicle that gets around 50 mpg in the city.
Also we need to devote more effort to alternative energy and that’s going to take tax incentives that could be funded by a increased gas tax. When we had the last gas crisis I suggested raising the gas tax by 50 cents a gallon and nearly was booed off the podium. But our usage of fuel has been a Pavlovian conditioning by oil interests making cheap imported oil so available while at the same time discouraging domestic drilling and alternative energy development. It’s a little like other crisis situations we can see coming but feel we’ll deal with tomorrow — levees in New Orleans as an example.
We have the talent and ability to plan for a better future. But the will to pay for it now on the installment plan somehow is never popular. A 10 a gallon gas tax for the next 10 years would be a good start IMHO.
The mindset that the government is the savior of all is bunk. All raising gas taxes will do is harm the US economy in the end. Robin Hood strategies are never as productive as letting the free market create products and technologies that the consumer will accept and that work. They may not happen over night, but they will come. A more effective strategy would be to grant tax breaks to those who develop and practice energy saving methods/technologies rather than punishing the consumer.
I doubt that we would even notice a ten cents tax increase but I have a problem with increasing taxes just to slow consumption. Haven’t we tried basically the same thing with tobacco taxes? I would feel much better about the concept if I could feel good about the use of the increased tax revenue, but I can’t so far. This also hurts so many people that are struggling financially already and can’t reduce their consumption any more without hardships. And the people that can afford it aren’t effected nearly as much and can pretty much do as they please.
Raising gas taxes hurts the poor much more than the rich. It would help slow consumption, but perhaps there are more appropriate ways to encourage fuel conservation (broader and heavier taxes on less efficient vehicles, subsidies for junking less efficient vehicles, greater mass-transit subsidies, rebates for more efficient appliances including HVAC systems, more car pool lanes, abolition of non-automated toll stations, for example). I am sure that retail companies won’t support higher gas taxes since most retail executives are concerned about sales this week, not energy independence 10 years from now.
Doc, you kill me! “Environmental misery pimps”! Where can I buy the t-shirt?
Just want to make one point… the E.M.P.s’ position, I believe, is that we shouldn’t spoil even a small corner of what (in the words of the Natural Resources Defense Council) is “one of the world’s last truly pristine wild places” in order to pump out what will probably amount to less than a year’s worth of U.S. oil consumption. And that oil, were we to begin the process today, would take a good 10 years to reach market. By then, if we haven’t made significant progress towards finding alternative forms of energy, we’re going to be driving Flintstone cars anyway.
I don’t agree with the idea of increasing taxes in order to slow consumption. As noted previously, there has been little success doing so with other products. Think about who it would hurt — for example, it could hurt larger families (5+ members) to a greater extent than smaller households (i.e., those with 4 or fewer members) — and the larger household can probably ill afford to spend even more money on gasoline. I understand the need to move to vehicles that are more fuel efficient, but have you ever tried to find a small, fuel efficient car that has room for 3 teenage boys in the back seat? (Yes, I drive an SUV. We tried to downsize, but couldn’t find a vehicle that had room for everyone and enough gas mileage improvement to make it worthwhile). Let’s look at the big picture first.
It’s imperative that we find some way to reduce our dependence on oil. Equating increased oil prices and increased tobacco prices on consumption is disingenuous at best. Although they may think so, consumers are not physically addicted to using gasoline, for one thing. And the recent increase in prices has resulted in a downturn in consumption as well as a move toward smaller, more fuel efficient cars.
But reduced consumption is not the only answer. As Warren points out, the revenue needs to be spent on finding alternative energy sources.
And by the way, we (the consumer) subsidize our current mess in more ways than most of us are aware. Because Hummers weigh so much, they actually qualify their owners for a tax incentive designed for farmers and others who use heavy equipment in their businesses. So, not only are Hummer owners clogging roads, using more fuel than anyone else, the government is giving them a tax break to do so.
I much prefer managed price increases a la 10¢/year than random increases.
Some of these arguments remind me of the old admonition, “eat up your vegetables, there are children starving in other countries”. That is, they are red herrings and not the least bit relevant. While it is probably true that poor people would be more badly affected than the rich if gas taxes were increased, this doesn’t mean that those taxes shouldn’t be increased. What it means is that a way should be found to make everyone contribute more to conserving energy and reducing gas and oil usage. The other argument that keeps recurring, that tax money isn’t ring fenced and can therefore disappear into places where it is not intended while not making any improvements or change where it is intended, is also a false one. And for the same reason. if there is an awareness that money is needed in a specific area then the system should be changed (something I don’t believe can’t be done simply, quickly and easily if the will is there) to ensure that taxes taken for a specific reason or project are sent directly to that area with no diversions along the way. Do not pass Go, do not stop at the red light but go directly to jail if you cannot find ways and means to at least start making a difference. There really is no valid excuse and time is running out.
Rick,
My brother, previously a long-time attorney for the Natural Resources Defense Council, once told me that the delivery window for ANWR oil is eight years, and that the supply would equal one-third of our total national consumption to near the end of our lifetimes (at current rates). Further, in light of the devastation – and potential devastation – of our petroleum infrastructure by recent hurricanes, how could anyone with a lick of sense argue against diversification of our domestic production?
Additionally, please use the term “spoil” advisedly when discussing the relatively small plot of land called ANWR. Again, there is no evidence that any Alaskan oil drilling has “spoiled” anything. Rather, the wildlife (reindeer, etc.) in current drilling areas has actually increased significantly.
This comment will make me very popular on this board, I’m sure.
It’s time that Americans stop subsidizing sprawl, mortgaging our future, and endangering our own national security by keeping the tax on gasoline artificially low.
It’s time that American commercial real estate developers stop responding to the effects of artificially cheap gasoline ($3.00 is still cheap by world standards) by building new shopping centers on the fringes of our towns and cities. How many of all the new retail centers under construction in 2005 will be half vacant with weed-filled parking lots in 20 years or less? No society in human history has ever thrived over the long term by so hugely misallocating resources as we do now.
If we don’t stop the process begun by our grandparents in the Truman/Eisenhower era, and indeed reverse that process, whereby we create ever larger, ever less sustainable cities, we, and our children, are doomed.
A gasoline tax such as the one proposed by Mr. Jackson is a good first step in encouraging people to think about ways in which they can conserve. A second step would be to more heavily tax large vehicles with low mpg, and stop the subsidy to GM, Ford, and Daimler Chrysler (especially the loophole that allows them to classify passenger vehicles as “trucks”). A low gas tax is as much of a drug to those dinosaurs as slotting fees are to supermarket chains. Finally, I agree with the beer guy’s idea that simply reducing consumption of gasoline is only a Band-Aid–we need to really think about everything we do with petroleum, and ask ourselves if there’s a way to convert those uses to sustainable ones.
I don’t care what anyone’s cousin in the oil industry says–we will run out of easily obtainable oil in our lifetimes, and no one really knows how much is left in the ground, least of all the Saudi royal family or the executives at Shell. Human ingenuity will go a long way, but we all have a responsibility to conserve.
My cousin, a long-time oil company executive in New Orleans and Houston, says we’ll never run out of oil. “That last gallon will cost billions of dollars, but we’ll never run out.”
AutoNation is looking in all the wrong places for energy conservation. Before we become Chicken Little, declaring that the petroleum sky is falling, we need to get a grip.
Of all uses for crude oil, gasoline represents but a fraction. Oil-fired power plants, oil-heated homes, tires, plastics, fertilizers, and many other products rely on petroleum for basic ingredients, not just processing them. Conserving gasoline only minimally impacts total petroleum use. This late-breaking news: If every automobile in the U.S. were replaced with a hybrid car today, our total gasoline use would return to today’s levels in just eight years (Car and Driver Magazine).
Other late-breaking news: 1.) Nuclear power plants have made huge safety advances in Europe and elsewhere, but we wouldn’t know about that in the U.S. because we haven’t built a nuclear plant in decades. 2.) Oil shale is often not included in oil reserve figures, yet potentially could supply as much as a third of our annual needs (not just gas, but all other petroleum uses). 3.) Standardizing just one gasoline recipe for the entire U.S. would reduce refinery costs by up to 25%. 4.) The environmental misery pimps who decry drilling into the ample reserves in the Arctic National Wildlife Refuge (ANWR) neglect to take into account that the proposed drilling affects an extremely small percentage of the entire refuge, that in other Alaskan drilling areas wildlife populations have actually increased, and that ANWR would supply up to a third of our needs while diversifying domestic supply from the hurricane-vulnerable gulf states.
My message to retailers is to become knowledgeable about their ENTIRE petroleum usage. In my core business, supermarkets, we need to abandon plastic bags (with their accompanying negative environmental impact), sell milk only in paper containers (which increase shelf life due to light blockage), and force suppliers to reduce plastic content in packaging.
Doc…I’m sure you’ll agree that if anyone has more interest in what the NRDC has to say on the subject of drilling in the Arctic National Wildlife Refuge, they should go to the source, rather than rely on second hand information from me or the opinions of a former employee. Click here for relevant statements on their website.