CQ TODAY ONLINE NEWS
July 11, 2009 – 9:38 a.m.
Are Conditions Right For Gas Tax Hike?
By Shawn Zeller, CQ Staff
But now, with the industry’s reputation in free fall, carmakers are looking to project an image of greater openness to change. And their chief point man on that mission is Dave McCurdy, a Democrat who represented Oklahoma’s 4th District in Congress from 1981 to 1995. He now leads the Alliance of Automobile Manufacturers, the trade group for both U.S. and foreign carmakers, as its president and chief executive.
His job will be easier than it might be, at least: McCurdy’s group takes no position on the controversial auto bailout plans — meaning that he hasn’t even met with the Obama administration’s automobile task force, which oversees the rescue effort.
Instead, the main focus of the industry’s new agenda is to reverse its recent notoriety and rebrand automakers as environmental stewards and cutting-edge innovators. McCurdy, who from 1998 to 2007 headed the Electronic Industries Alliance, a technology trade group, says he wants consumers to start thinking about carmakers the same way they think of Google Inc. or Apple Inc.
“We need to be at the table on climate change and energy independence. We have to be at the table on safety. We need to be at the broader table on innovation,” he says. “It’s incredible, the amount of innovation in this industry, and I’m not sure people understand that.”
That point came across vividly, McCurdy says, when 10 industry executives — including Alan Mulally, chief executive of Ford Motor Co., and his counterparts at General Motors and Chrysler — stood alongside President Obama as he announced tough new fuel economy standards May 19.
A similar perestroika-type moment came last year, McCurdy says, when industry leaders teamed with their longtime nemesis on fuel standards, California GOP Gov. Arnold Schwarzenegger , to produce a new public information initiative stressing measures to improve gas mileage and reduce vehicle pollution.
Such events might seem like little more than photo opportunities, long on symbolism and short on substance, the sort of thing that jaded critics of the industry would dismiss as mere public relations. But as McCurdy relates, when he took on the job two years ago, the members of the auto alliance were fending off a lawsuit from Schwarzenegger accusing the six biggest automakers of creating a public nuisance with their high-emission vehicles. A California federal court dismissed the suit.
Which is not to say the automobile alliance isn’t also paying close attention to the impact of symbols. McCurdy’s office features his photos of polar bears from a recent climate change research mission to the North Pole, as well as copies of “Driving Climate Change” by Daniel Sperling and James S. Cannon, a book he requires his staff to read.
But McCurdy also stresses that he’s about to put the group on an unfamiliar lobbying offensive: enlisting support in Congress for an increase in the federal gas tax to expand the market for compact vehicles, which he says would help manufacturers meet the new fuel economy rules.
It’s certainly not every day that an industry petitions lawmakers to increase costs for consumers of its product. But McCurdy says the auto industry recognizes that it has to take its medicine, adding that the aim is to set a floor on the price of gas while permitting supply and demand to set prices above the floor. The optimal base price, McCurdy suggests, could be $4, where automakers say they first saw a big shift in consumer buying habits.
“We want to spur that conversation,” he says. “Any legislation needs to make sure there is a price signal, because regulation is not going to accomplish the objective” of enhancing efficiency standards by itself.
Making the Math Work
Industry support for a higher gas tax isn’t new. Ford began talking about it four years ago, and the industry has long had an official position supporting it. What’s different, says Dan Becker, director of the Safe Climate Campaign, an environmental advocacy group, is McCurdy’s pledge to lobby for it.
“It brought a smile to my face,” he says in reference to McCurdy’s lobbying push. “Because for years the industry has said they support a gas tax, but they’ve never actually lifted a finger to make it happen.”
Of course, activists such as Becker note ruefully that this lobbying effort would have meant a lot more when automakers had far more clout than they do today. “They clearly have a lot less influence than they used to,” Becker says. “But it would be welcome to have them try to use it for something other than shaking the tin cup for their own benefit.”
McCurdy appears to be walking the same walk on the gas tax as most environmentalists: touting its environmental benefits as well as its importance to national security, as a means of reducing the flow of revenue to oil-rich regimes. In the bigger picture, though, self-interest remains clearly in play. Only a few car models meet the fuel economy standards the automakers accepted in May, which will rise up to 39 miles to the gallon for the average vehicle sold in 2016.
The industry’s success will depend not so much on what comes off assembly lines, but what drives off dealer lots. For new fuel efficiency rules to prove themselves economically, they have to be reflected in overall sales, not just in new production standards.
If Congress doesn’t act to raise gas prices, McCurdy argues, his members will have trouble making the math work in favor of more fuel-efficient product lines. “If the policy is to keep energy prices artificially low, then I think it hurts the industry,” McCurdy says.
It could well be, in other words, that as with other climate change and environmental initiatives, industry interests are starting to align with the green-advocacy push for a higher gas tax. Becker, for one, says “a well-structured gas tax” — one that is phased in and includes credits for the poor — “is something that many environmentalists support.”
Even conservatives, such as GOP Sen. George V. Voinovich of Ohio and columnist Charles Krauthammer, have endorsed the idea of a steeper gas tax as a means of paying for infrastructure improvements, meeting environmental goals and keeping money out of the hands of foreign oil-producing countries.
Economists say the idea makes sense, too. Robert N. Stavins, director of the Harvard Environmental Economics Program, argued in a recent opinion article that “gasoline prices are a much more effective — and more cost-effective — means of cutting gasoline demand” than tough fuel economy rules.
Taxing Dilemmas
There’s another curious feature of the emerging gas tax debate: The Obama administration and many Democrats on Capitol Hill are standing in the way.
In March, Transportation Secretary Ray LaHood told Voinovich that the idea was “off the table for now,” explaining that the Obama administration could “ill afford to tell people we’re going to raise the gasoline tax” in “these hard economic times” and “with so many people out of work.”
At the same hearing of the Environment and Public Works Committee, Chairwoman Barbara Boxer , a California Democrat, said she was also “averse” to a gas tax increase.
But gas tax collections have fallen recently in response to higher gas prices and a rare drop in driving. That development, combined with the widely held view that America’s transportation infrastructure needs to be comprehensively overhauled — the kind of outlay that traditionally gets funded through gas taxes — will likely force congressional Democrats to give the issue a second look this session.
If nothing else, proposed gas tax hikes will figure prominently in the reauthorization of a big highway funding bill that is scheduled to move this year. Self-interest will also be a central factor in that debate, since lawmakers typically load the legislation with local infrastructure improvements that make for popular support in re-election bids.
Oil companies also maintain that they’re prepared for a tax hike. John Felmy, chief economist at the American Petroleum Institute, the industry’s Washington trade group, says that a tax increase clearly earmarked for infrastructure would benefit his members, though he adds they would oppose any hike that would be regressive and burdensome to average Americans.
House Transportation and Infrastructure Chairman James L. Oberstar , a Minnesota Democrat, has said he would consider an increase in the tax as a means of funding the infrastructure improvements he wants in this year’s bill.
But Oberstar says he’s also considering a vehicle mileage tax, which would require drivers to pay a fee based not on how much gas they use but how far they drive. That wouldn’t provide an incentive to favor one type of vehicle over another, and therefore wouldn’t help automakers as much as a gas tax increase.
All in all, the gas tax hike will likely prove a tough sell in a recession-minded Congress. But McCurdy says he’ll keep pressing, and with the new fuel economy rules not slated to take full effect for seven more years, he should have ample time to make his case.
But already, he says, with gas prices down 40 percent from their peaks of last summer, buyers are trending back toward bigger cars. And while committed environmentalists may buy a hybrid out of a sense of social conscience, average Americans can’t justify it. “It costs $5,000 more for the hybrid,” McCurdy says, and “the math does not add up” for most consumers. “There are people making that calculation every day at $2 gas.”
What might prompt policy makers to change their tune? McCurdy says he hopes it’s good sense. “I hope it’s not another oil crash. I hope it’s not another war. I hope it’s not another catastrophe or attack.”




Comments
NO to gas tax. All taxes eventually get passed on to the end user. We have enough taxes as it is. I am getting tired of bailing everyone out. I don't expect people to bail me out. I handle my expenses. If I did like governmen and many big businesses do w/my check book. I would be homeless. I don't need big brother telling me what is best for me, I can think w/o all their "help"!!!
Why raise taxes at this point. Just establish a floor below which the price cannot go. Example: Price of oil at $64/barrel with gas around $2.50/gal. If the floor is $3.00, the 50 cent difference can be applied to high-speed transit and research/development of alternative fuel vehicles. The floor can be adjusted as necessary.
Meanwhile the gas tax has lost over 45% of its value due to inflation since it was last raised.
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