Now that the $100 tax rebate proposed by the Senate Republican leadership as a response to rising gasoline prices has been discarded, it is time to get serious. Any effective response to climbing gas prices must recognize a geological reality, namely that the earth’s oil reserves are shrinking.
The amount of oil pumped has exceeded new discoveries since 1980. And the gap is widening. In 2004, for example, the world pumped nearly 31 billion barrels of oil while discovering fewer than 8 billion barrels of new oil.
Instead of encouraging gasoline use with tax rebates or gas tax holidays, we need a way to reduce gasoline use, one that is practical and politically acceptable. We need a higher gas tax, but the only way to get a gas tax rise large enough to wean us from imported oil is to offset the rise with a reduction in the tax on income.
The gas tax boost should be substantial – a rise that will send a strong, clear signal to consumers – and it should be gradually phased in. A gasoline tax hike of 30