I’m intrigued by Charles Krauthammer’s proposal for a “net-zero gas tax” in the latest Weekly Standard. Basically, he proposes an increase in the gas tax now, while energy prices are low, to decrease U.S. consumption. But to avoid hitting cash-strapped drivers in the midst of a recession, he’d directly offset the gas-tax hike with a reduction in payroll taxes. Krauthammer argues it would promote energy independence without overtaxing or fattening the government’s revenue take.
It sounds more politically feasible than, say, imposing carbon taxes on energy consumers to pay for low taxes on investment. But I have a few questions. While U.S. consumption obviously has a major impact on world oil prices, we don’t in fact get most of our oil from our “geopolitical adversaries” — many of our allies do. To what extent will this really promote our energy independence and our geopolitical goals? Second, when President Bush proposed carving personal accounts out of Social Security he was accused of diverting much-needed revenue from the retirement program. The revenues at stake here are much smaller and the Social Security trust fund is an accounting fiction in any event, but at least Bush was offsetting the diverted revenue with personal accounts and progressive benefit reductions. Won’t there be an objection along these lines to Krauthammer’s plan?