Detroit's Salvation: Higher Gas Taxes

http://www.businessweek.com/investor/content/oct2009/pi2009105_910211.htm?chan=investing_investing+index+page_top+stories

Chris Farrell's article Detroit's Salvation: Higher Gas Taxes states that higher gas taxes would increase the demand for smaller, fuel efficient automobiles thus helping out the United States auto industry. With the Cash for Clunkers trade in program completed, car sales have fallen in September because many people took advantage of the $3,500 or $4,500 government rebate to purchase newer, fuel efficient vehicles. As a result of that, experts believe that a significant increase in the gas tax will help to bailout the still-struggling auto industry.

As a result of the now defunct Cash for Clunkers program, experts believe that a significant increase in the gas tax will help to bailout the still-struggling auto industry. Currently, the federal gas tax sits at 18.4 cents per gallon. N. Gregory Mankiw, an economist at Harvard University and former chair of the White House Council of Economic Advisers under President George W. Bush, believes that the federal gas tax should increase from the current level by $1 per gallon. Mankiw suggests phasing the tax increase in 10 cent increments for 10 years. However, three unnamed economists suggested back in 2007 issue of the Journal of Economic Literature that the federal gas tax should be $2.10. However one looks at it, it is a significant increase for your average citizen.

As a car driving American citizen, I would vehemently argue against an increase the federal gas tax. I am a college student with very little money and a gas tax increase of any significant change would greatly harm my personal finances. This is also on top of the fact that I drive a new, fuel efficient vehicle (2009 Pontiac Vibe, 25 city/35 highway). Low-income individuals who work full time would also have a difficult time to find the extra needed money to support a gas tax increase. In whole, while an increase in the gas tax may appeal to those in Detroit and on Capitol Hill, it could potentially devastate your average American car driver.