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A Tax on Gasoline Can Improve Retirement Living By Stephen J. Butler

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The root of our country's energy policy is found in Kenneth Graham's 1913 book, "The Wind in the Willows." The character, "Toad," steals a "motorcar" and, "?as if in a dream, all sense of right and wrong, all fear of obvious consequences, seemed temporarily suspended. He increased his pace, and as the car devoured the street and leapt forth on the high road through the open country, he was only conscious that he was Toad once more, Toad at his best and highest, Toad the terror, the traffic-queller, the Lord of the lone trail, before whom all must give way or be smitten into nothingness and everlasting night. ?he sped he knew not whither, fulfilling his instincts, living his hour, reckless of what might come to him."

In other words, Toad was just as self-indulgent, short-sighted and obsessed with automobiles in 1913 as we are today. Hybrid gas/electric cars are now available, practical, and use almost one-third less fuel than the average car on showroom floors. Unfortunately, they are not selling well. Americans won't pay the extra $3,000 that hybridization adds to the cost of a new car.

The key to making fuel-efficient cars more attractive is to make the gas they require more expensive. We can do this by taxing it heavily. No other alternative works. For Europeans, gas costs $3.00-$4.00 per gallon, and most of the difference between their prices and ours is attributable to taxes. People still drive SUV's and gas guzzlers over there, but at least those that do so make the sacrifice. The rest of the population isn't forced to subsidize the indulgence with hidden costs buried in their tax systems.

Our average fuel mileage is the same today as it was in 1980. Manufacturers have mandates to increase the average miles per gallon across their product lines, but what good does that do when we refuse to buy the cars that save gas? The Hummer, at 12 miles per gallon, is the nation's new SUV most in demand at the moment. In the tradeoff between power and economy, power has been winning with consumers since the end of the gas lines in 1974.

Anyone who looks at the price on the gas pump and thinks we actually have inexpensive fuel is misinformed. It is subsidized heavily and paid for by all of us who pay income taxes. For openers, we fight wars to protect our petroleum interests, and we spend money to support and protect governments that make their petroleum available to us. Further subsidies to the oil industry at all layers of government simply cost us money as citizens before our cars make it beyond the end of our driveways. One study shows that a gallon of gas actually costs $15.75.

The idea of dramatically increasing taxes on fuel is political poison. All industries involving petroleum or petroleum-based products like things just the way they are?with true costs hidden. Politicians are not inclined to paddle upstream against those waves of campaign contributions from special interests?unless the electorate sends an overpowering mandate reflecting just common sense.

A tax is not that terrible. It allows people who love their SUV's and gas guzzlers to keep them. It sure beats "jawboning" the auto industry to go through the motions of designing cars that nobody will buy and convincing ourselves that we have "done something."

A substantial fuel tax also allows us to build up a sinking fund to fight what might someday be a war that is clearly over oil and only oil. These wars can be expensive. The government's estimate is $200 billion for the upcoming Gulf War. Short of war, we spend fortunes courting regimes that hate us. What sent me over the edge recently was reading in a boating magazine about a potentate whose private 450-foot yacht was just nearing completion in an Italian boatyard at a cost of $150 million. In the light of what is happening in the world today, how can anyone be so arrogant--- and on largely our nickel?

I don't have much faith in the vaunted fuel-cell technology as a practical answer to the extent that hybrid cars (or just economy cars and public transportation) offer us right now. The fuel cell hope is like the "chaff" that fighter planes use to confuse surface-to-air missiles. Fuel cell technology will require an entirely new infrastructure of "fuel cell stations" and years of trial and error. By comparison, hybrid cars are here today, and a substantial gas tax would send them flying out of showrooms. It would even bring out those "Gyro Gearloose" types who read Mechanics Illustrated and who would figure out ways to design and market retrofitting devices to bring hybridization to existing vehicles.

An immediate and substantial gas tax, then, is something I see as a silver bullet that would wake us up and immediately set us on the road to a long-term solution. It would have the same shock effect as that fateful morning in the 70's when we all got on the freeway and couldn't go more than 55 miles an hour. There might be other positive, unintended consequences as well. Where sheer anarchy reigns on our freeways today with average speeds of 75-80 mph, people might slow down a little just to save fuel. Others might think first before mindlessly buzzing around an otherwise peaceful lake on a jet ski. The list is endless.

Why is this "hot potato" the subject of a retirement column? Because retirees and those approaching retirement generally don't have some macho image they need to reinforce by driving a vehicle with capabilities and power they never use. "Not that there's anything wrong with that," I'm quick to add. It's just that the rest of us shouldn't have to pay for it. It's a zero sum game. If we double the price of gas by adding a tax, we can use that money to pay off or protect oil rich countries instead of using income taxes or government borrowing the way we do today. For retirees who tend to drive less, the gas tax will represent a better deal than higher income taxes.

As a group, retirees are a powerful political force and perhaps the only national constituency with muscle enough to counteract the special interests that currently stand in the way of an effective energy policy. Retirees have "been there and done that." Older people know what they are doing. It's not accidental that people in their 70's around the world are being elected to leadership positions as heads of governments. The rest of us, by comparison, are collectively like Toad when he is "fulfilling his instincts, living his hour, reckless of what might come to him." Cheap gas just contributes to our national delinquency.

(Mr. Butler enjoys a collection of high-powered automobiles, motorcycles, and boats. He is a modern-day Toad of the highest order who hopes someday to become a "recovering gasaholic.")

Correction: Last week's column pointed out that capital gains on the sale of a personal residence would be tax-free if invested in another residence. In fact, the first $250,000 is tax-free regardless of how the money is spent.