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Hike gas taxes

THE KNEE-JERK reaction to the spike in gas prices seems to be to reduce gasoline taxes. This is the wrong thing to do. If anything, gas taxes should be raised. Current prices are nothing but a reflection of the law of supply and demand. Supply is tight, prices rise until demand matches supply. It's Economics 101. Lower the gas tax, and the market price will simply rise until supply matches demand again, so the net price will actually change very little.

Instead of the money going to government revenue, more of it goes offshore to unfriendly countries. If we raise fuel taxes, it will depress the market price of oil by suppressing demand, so only a fraction of the tax increase is likely to be reflected in a net price increase. The tax money stays here to reduce deficits and fund highway and other infrastructure improvements -- a net benefit to the economy.

If the tax increases are used to pay for energy saving, infrastructure improvements, and subsidizing alternate energy, demand is further suppressed, as is the market price. Any adverse impact on low-income people can be handled by tax rebates or heating oil subsidies funded by the tax. A dollar that goes offshore for oil is a dollar lost to the economy.


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