Andrew Samwick points to a paper by Jayanta Sen that suggests that it is in the interest of oil consuming nations to tax oil. Sen writes,
a tax on crude would transfer wealth of $100+ billion a year from foreign governments to the US consumers, thus providing a major economic stimulus to the economy while at the same time reducing consumption of gas…For a range of demand and supply elasticities that I study, the wealth transfer savings for the United States (which has about one-third of global oil imports) should be in the range of $108 to $152 billion a year.
At the Saffran Conference, Jeff Frankel rattled off seven advantages of a tax on oil–I don’t remember all of them, but they are bound to include reducing pollution, reducing trade imbalances, encouraging search for alternative energy, and more.
But that is an example of a policy advocated by economists that is a political non-starter.
READER COMMENTS
dearieme
Nov 7 2005 at 6:23pm
Would it be a non-starter if the trade-off was a cut in worker payments into the Social Security system? How would the arithmetic look: how big a tax on oil or gas would be needed to exempt every American from paying into Social Security? Could you even call the tax a “Social Security tax”?
Mark T
Nov 8 2005 at 8:57am
Far better, introduce an import tax so that it never falls below $60. This provides a minimum for consumers – encouraging efficiency etc, but also a minimum for producers, encouraging alternative energy, development of oil tar and shale (significant geo-political benefit) and takes government out of the redistribution issues. Setting it at curret levels would be politically acceptable sice it is taking away a possible windfall, not increasing hurt from here. Windfall profits to oil companies could be recovered through corp tax offsettable for expenditure on refineries and oil tar etc
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