Just a provocative thought experiment: we could completely fund US government operations with an approximately $10/gallon tax on fuel. That would mean no income tax, no corporate income tax, no estate tax. Just pay for the fuel you use.
Effectively such a tax would act like a value-added tax, which the conservative economic theorists have been arguing in favor of for decades. Such a tax would tax consumption, as opposed to taxing honest labor and investment.
Such a tax would also save literally billions of dollars because it would be simpler and less expensive to collect. I guess it would suck if you were an accountant though.
Such a tax also could be managed by a currency board to maintain a target price for fuel, and you could adjust the tax rate as necessary, similar to the way the Fed adjusts interest rates. Doing so would eliminate any pricing power the Russians, Arabs, and big oil companies have in the oil market worldwide, which wouldn't be a bad thing.
You might argue that such a high fuel cost would destroy the US economy. On the other hand, many rich European countries (France) have very high fuel costs due to very high fuel taxes and there seems to be no shortage of people driving and it doesn't look like people are starving there.
I think it’s an interesting thought experiment… with a few major issues.
Such a tax would be highly regressive - because the United States has such poor transit infrastructure, the working poor and middle class predominantly drive to work and would be hit proportionally very hard. someone who drives 60 miles a day to clean houses, work retail, etc would pay $20 a day in taxes on their gross income of $75 a day, while someone who drives 60 miles a day to run a Fortune 500 would also pay $20 a day in taxes on their gross income of $1M a day. That’s the big problem with use taxes.
It would cause people to drive less, which is really really good, but our public transit and biking infrastructure is terrible outside a handful of major cities, and then the driving less would reduce revenue
Similarly, you’d have to come up with a way to tax electric and other alternative fuel vehicles, otherwise the massive shift to them would again starve the government of revenue, and probably overwhelm the electrical grid in the short term.
It would probably also have a massive effect on real estate, with far flung suburbs totally decimated by the sudden and incredibly high (proportionally) cost of getting anywhere. This would be a good thing in the long run, encouraging higher density, more sustainable, more walkable and rideable communities, but it couldn’t be done this quickly without causing a lot of suffering.
