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Should We Tax the Gas?

In this day and age gasoline and carbon emitting fuels are a key product in every man and woman in the United States. But this is causing a huge amount of carbon to be released into the atmosphere, which is slowly killing the planet and all of its inhabitants. To try and stop the effects, the government has decided to make it so that not as many people use gasoline and fossil fuels. As described by the Stanford Hoover Institution, the plan is to use a tax on fuels called the revenue-neutral tax. This tax is designed to increase the price of fuels, but put the money earned by the fuel tax to decrease the taxes in other places, for example income tax.

Graph explaining the effects of a Revenue-neutral carbon tax provided by Carbon Tax Center

It is beneficial because the government is not trying to earn money but rather keep the money in the hands of the citizens. Also because of the higher gas prices the incentive to buy gas is lower which will prevent people from buying as much. This eventually leads to a decline in the use of gas, which in turns slows down the amount of carbon being released in the atmosphere. I believe this is a very good idea, because not only does it discourage customers from using fuels, but it also promotes businesses to make more fuel-efficient and hybrid cars. Not only does this help the planet from harmful carbon emissions, but it also helps the US economy because the US would not have to import foreign oil from and sell more American made cars that have a better effect on the environment.  So the tax could help bring economic growth back to the US so our import costs would not be more than out export profit. After hearing all of these examples of how this tax is great and will help the country tremendously, there are still people who do not like the idea. One opposing idea that I have heard is that ‘if the citizens are getting more money (from the decreased income taxes and such) then won’t they continue buying gasoline’. This is a good argument to the tax. But I believe I have the explanation about why the tax works rather than what the opposition says will happen. My idea centers on an idea brought up in the video Comedy, Economics, and Carbon taxes. In the video it describes a hypothetical situation about three people selling each other fuel consuming machines and as a consequence have to pay extra for medical bill because of the major air pollution. In the end the three people each sold on machine and earned 100 dollars, but had to pay 140 extra dollars in medical expenses. In conclusion each person had lost 40 dollars with out even knowing they had done so. This is a similar situation to the revenue-neutral tax.  A person finds out that the price of gas is too large, but does not necessarily think about the fact that he/she has enough money to afford it. The consumer thinks they are doing the best for themselves by not buying the pricy gas when they could.

Data given by the British Columbia Budget Website. The British Columbia is currently experimenting with the tax.

Another argument is that the law of demand clearly states that when the price of a good is raises the demand of the good is decreased. This is the case most of the time, except for inelastic good, which are goods that are bought no matter the price. This may be the case in today’s society, in which fuels are used everyday, which would make the revenue-neutral tax a flop. But there is no real evidence whether this tax actually works or not, but all eyes are turned to the British Columbia which is in the process of figuring out if it works or not.

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