In a previous post, I advocated increasing taxes on gasoline to wean our country off oil and start spurring up interest in public transportation or alternative sources of energy. At the time, Hillary Clinton and John McCain were pushing for their own (failed) gas tax holiday plan. Most economists and policy wonks (as well as any person who possesses logic) thought it was a joke. Nonetheless, it seemed that calling for a higher gas tax would incense Americans who are already struggling with higher food costs. But as gas prices are on the rise, more and more people are recognizing the need for higher gas prices.
Economist Greg Mankiw published an article in the NY Times yesterday mostly dealing with the notion to decrease corporate taxes from 35% to 25%. Doing so would, of course, result in lower government revenue and a bigger deficit. So Mankiw conceded:
Indeed, if we increased the tax on gasoline to the level that many experts consider optimal, we could raise enough revenue to eliminate the corporate income tax. And the price at the pump would still be far lower in the United States than in much of Europe.
Don’t laugh. I’m serious.
Then again, think about it. With higher gas prices will come the need to innovate and create sustainable energy sources. Once these are developed, our interest in the Middle East is all but dwindled. Why do we need to be friendly with some of these hostile nations if they have no leverage? The only need for us to deal with them would be to protect Israel’s livelihood. Even Venezuela fits into this scheme.
There are many other reasons to love high gas prices.