June 7th, 2008 at 1:14 pm
It has only been a day, and Charles Krauthammer’s column on townhall.com has received 198 comments (at the time of this post). The normally conservative thinker advocated a gasoline floor (for example, $6/gal) where the government would tax/confiscate the balance of the normal gas price and use it to lower payroll taxes. High-priced gasoline, Krauthammer argues, is forcing people to move to more efficient cars faster than government CAFE standards.
This has problems on several fronts. Even Al Gore suggested only a 50-cent gas tax in his book.
Price Control. The tax floor would present a choice to oil companies: increase drilling and production at the level it could bring at $6/gal, or cede that money over to the federal government in tax dollars. Or even more perversely, the oil companies would just charge $6/gal for its gasoline and keep the supply activity at current levels or some government-demanded level. This alone is reason enough not to pursue this policy.
Artificially raising the price also affects the decision-making of America’s employers and employees. Potential employees will look at the cost of a commute and ponder if it’s worth it to switch to a closer employer who may pay less. Employers will have smaller talent pools to draw from. Not everything can be done with Internet and Microsoft Netmeeting, unfortunately for me.
Krauthammer’s premise that we griped and paid $3/gal but mobilized at $4/gal ignores the fact that people changed their lifestyle at $3/gal in other ways: less shopping and entertainment, cheaper durable goods, changes in their food purchases and their eating out, among other things. Some things really aren’t worth the gasoline it takes to do them.
Payroll Tax Refund. Payroll taxes are bordering on insanity. FICA and other taxes reduce the ability of the employer to lure good talent. They can cause companies to move operations elsewhere for less-taxed labor. They also obscure the visibility of the tax that is collected by forcing employers to pay half and employees to pay half. Games can be played with company cars, expense accounts, corporate jets, and other things to shelter against the payroll tax. This is an important item to address, but the gas floor method isn’t the way to do it.
Government transactions tend to have an entropic effect. If the government takes money away from you through taxation and gives it to you through a benefit or entitlement, there is usually a cost involved. It’s better for you if government doesn’t take the money from you in the first place.
Liberty. One reason why liberty works better than anything else is that government cannot collect enough information to make smart decisions for everyone, and even if it could collect that information, bureaucrats are subject to different incentives than the people they serve. You are the person best equipped to spend your money. The government should not force you to raise the priority of your transportation in relation to all the other activities you spend your money on.
Maybe we have seen the last of $2 or even $3 gasoline. The number on the sign has no moral value. There is no right value for the price of anything. What does have moral value is the fact that imposition on the free market by government results in inefficiency. Our work is siphoned away a purchase or a tax bill at a time, to people who would prefer your income be spent on something else.
The laborer deserves his wages. 
