“Everyone gets hurt by gas taxes because they drive up the cost of doing business and the price we all pay for everything. And they’re regressive, because the people who can least afford the increased prices are the poor. Mixing social engineering with tax policy may make the environmentalist and cycling lobbies feel good, but if green energy isn’t competitive (and frankly it never seems to be), manipulating the market with taxes to disadvantage other energies really isn’t the right solution.”There are several arguments here. Let me take them one-by-one.
Gasoline taxes drive up all costs
This is largely true. However, all taxes drive up costs. They drive up costs by exactly the amount of tax money collected. It’s true that gasoline taxes drive up the costs of almost all goods and services, but so does the HST. Income taxes also drive up costs. I have to earn a lot more than $100 to be able to buy $100 worth of groceries. I see no reason why gasoline taxes are any better or worse than income taxes or sales taxes.
Gasoline taxes are regressive
This is also true. When we talk about progressive and regressive taxes, we’re talking about how much is paid by poor and wealthy people. Our progressive income tax system takes ever higher percentages of your income as you move up in the tax brackets.
However, there is a limit to how much progressiveness is desirable. In the extreme, suppose that the richest person pays all taxes and the rest of us live tax-free. I think we can agree that this won’t work.
At the regressive extreme, suppose that we just demand $10,000 in taxes each year from every adult. This obviously won’t work either. If both extremes are no good, then there is some optimum level of progressiveness. However, we may disagree on what level is optimal.
The fact that gasoline taxes are regressive doesn’t automatically make them either good or bad. We must take a look at the total tax burden we face to judge whether we are at the right level of progressiveness. We shouldn’t just limit all tax changes to those that make the system more progressive.
Green Energy Isn’t Competitive
At present this is true. However, the side effects of polluting energies are externalities. This means that cleaning up the mess caused by burning oil is not paid for by those who burn the oil. To balance the playing field, we need to subsidize green energies. The hope is that over time these energies will become cheaper to produce.
We can disagree on how much the green energies should be subsidized, but I don’t think it is reasonable to compare current green energy costs to the cost of burning fossil fuels without factoring in the fossil fuel externalities.