Fuel Savings Accounts?
You've probably heard of Health Savings Accounts (HSAs) which allow workers to divert a portion of their pre-tax income into a special account to be used solely for health related expenditures (doctor's visits, dental work, medicine, etc.). The funds funneled into the HSA are tax free up to $3,050 for individuals or $6,150 for families.
This week, new legislation featuring fuel savings accounts, which would function similarly to HSAs in terms of allowing consumers to purchase gas with tax free income will be introduced in the Senate by Sen. Mark Begrich, a Democrat of Alaska.
The legislation, authored by Sen. Mark Begich...is aimed at lessening the burden of high gas prices on consumers. The bill comes as lawmakers on both sides of the aisle are scrambling to do something about gas prices, which are nearing $4 a gallon.
...“You get to put aside pre-tax dollars and the result is you get to buy your fuel with pre-tax dollars,” Begich said.
“On average, let’s assume people have a tax rate of 20 percent, which is probably average for an individual. At $4 a gallon, you’re going to save 80 cents right off the bat.”
As it stands, American consumers pay 18.4 cents per gallon in taxes for gasoline and 24.4 cents per gallon for diesel. On top of that, each state and some municipalities levy their own taxes, with the average state tax on gasoline at about 21 cents per gallon. Sen. Begich's proposed legislation wouldn't touch taxation at the pump, but it would in effect reduce double taxation on the income used to purchase fuel.
With gas prices in San Francisco at $4.20/gallon and rising, I'd certainly welcome the tax break that a fuel savings account would afford me, but I'm curious to see how other Members of the Ricochetoisie evaluate the proposal.
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Apr '11
Re: Fuel Savings Accounts?
It doesn't sound like a good idea to me.
First off, it would make gas purchases with pre-income tax dollars, not knock the gas taxes off the price at the pump. That would save some money, but it wouldn't make much difference for the half of the electorate that doesn't pay any income taxes anyway.
Second, the gas taxes at the pump are (theoretically) used to offset road maintenance, gas usage being a reasonably good proxy for road usage. Electric cars are starting to erode that proxy relationship, but for most people it still holds. I personally think this is a good way to make sure that people get taxed for road usage at approximately the same proportion in which they use the roads.
Third, why make our tax code more elaborate, when a more simple solution would suffice? Things are complicated enough as it is without carving out yet another tax provision for a politician to make his career on.
Aug '10
Re: Fuel Savings Accounts?
This is a terrible idea and naked pandering.
1. This would add transaction costs and exacerbate the tendency to make policy through tax expenditures.
2. It would subsidize petroleum consumption when if anything we should be taxing it. (Or to make a slightly weaker claim, that it's less bad to tax petroleum/consumption than to tax labor or capital gains). Whether or not you worry about climate change and other environmental issues, consider that subsidies often contribute not just to consumer surplus but also to rents (aka, producer surplus to factor owners) which in practice means that the House of Saud and Hugo Chavez would capture some large portion of the subsidy. This is straight out of David Ricardo's arguments against the corn laws.
Edited on May 3, 2011 at 3:51pmRe: Fuel Savings Accounts?
Hmm...this is probably the point. The Senator who proposed the legislation, you'll note, is from Alaska. He and his state certainly have an interest in seeing an increase in petroleum consumption.
Aug '10
Re: Fuel Savings Accounts?
How about rather than coming up with a lame idea like this one that Mr Begrich ask the leader of his party to let oil companies drill for oil in his state?
I know, makes too much sense.
Re: Fuel Savings Accounts?
I just filled the tank of my 1991 Toyota Corolla at $4.00 a gallon. Thirty-five smackers to fill the tank of my little red roadster. Highway robbery!
Feb '11
Re: Fuel Savings Accounts?
Wow.
This guy is actually in the United States Senate.
For real. He won an election.
Amazing. Someone should tell him 1) that Alaska can already sell all the oil it can produce 2) we don't need to encourage consumption of oil in the US 3) we have a rather large budget deficit right now 4) and his pal Obama blocked production of a lot of Alaskan oil, for no good reason, after the government cashed the check Shell gave them for that privilege.
But nooo. No one has told him about any of that. So he came up with this silly idea instead of doing anything that would actually help.
This is sadly typical of the sort of people we have in government today. Alas.
May '10
Re: Fuel Savings Accounts?
The bill would add complication to what is otherwise simple, so it's bad....but it would not encourage fuel consumption like a true subsidy.
In fact, it would discourage fuel consumption, in the same way that an HSA discourages excess health expenditures: Any pre-tax money not used from your account rolls over, continues to build, and is eventually yours to keep. So the less gas you buy, the more you're building a nest egg with pre-tax dollars.
Diane Ellis, Ed.
Hmm...this is probably the point. The Senator who proposed the legislation, you'll note, is from Alaska. He and his state certainly have an interest in seeing an increase in petroleum consumption. · May 3 at 3:49pm
Re: Fuel Savings Accounts?
Scott Reusser: The bill would add complication to what is otherwise simple, so it's bad....but it would not encourage fuel consumption like a true subsidy.
In fact, it would discourage fuel consumption, in the same way that an HSA discourages excess health expenditures: Any pre-tax money not used from your account rolls over, continues to build, and is eventually yours to keep. So the less gas you buy, the more you're building a nest egg with pre-tax dollars.
Ah, what an astute observation! That is indeed the effect that HSAs have. As a holder of an HSA, I never go to the doctor because I'm incentivized to save my money. I can't touch it for anything other than health expenditures until I'm a senior, but it's presently serving a duel purpose as an account for catastrophic health emergencies and as my retirement fund.
Maybe those politicians who'd like to see a decrease in fuel consumption should take a look at fuel savings accounts! That's a better, albeit sloppy, alternative to increasing taxes at the pump.
Mar '11
Re: Fuel Savings Accounts?
Screw more tax code! Drill, baby, drill!
Re: Fuel Savings Accounts?
West Los Angeles, today:
Apr '11
Re: Fuel Savings Accounts?
I have an HSA too, but there's a big difference between the HSA concept and this one for fuel. HSA's have two important goals: to lead people to make health care purchases with price in mind (increase competition), and to partially correct for the already existing tax benefit on health insurance to employers. People are already very price sensitive to gasoline. If Begich wants to let people pay less, then he should propose just cutting the tax on gas. If people would really save up a fuel account for the future, then it would have no effect at all, as people would still buy gas with their normal money and shift into the fuel account for their savings. If this ended up actually subsidizing current consumption, though, it would actually increase demand, and thus the price at the pump.
Nov '10
Re: Fuel Savings Accounts?
There guys really will do anything to avoid drilling for more oil, won't they?
May '10
Re: Fuel Savings Accounts?
President Obama's advice would be for you to trade in that gas-guzzler for a more fuel efficient model (although what that might be ...).
Apr '11
Re: Fuel Savings Accounts?
The key factor here is that the majority of expenses for gasoline are not optional. While I can in many cases pick and choose how often and for what services I go to the doctor, when my tank runs dry I have to put in gas. There is no other viable option for most people. Liberals like to think that we all live in urban communities with bus and tram lines everywhere, but for most Americans that is not the case. The high cost of gas causes us to reduce spending elsewhere, impacting the economy negatively for every dollar that is diverted. The tipping point where the cost of gas actually causes reduced usage is so high none of us would willingy go along with it. Never mind the fact that this entire issue is completely manufactured by politics. Its not an issue of engineering, science or nature, just politics.
Aug '10
Re: Fuel Savings Accounts?
Sam Dominguez: The key factor here is that the majority of expenses for gasoline are not optional.
...
Liberals like to think that we all live in urban communities with bus and tram lines everywhere, but for most Americans that is not the case.
This is why there's a big difference between short-run and long-run elasticity. In the short-run some things (e.g., gasoline and tobacco) are reasonably inelastic but in the long-run everything is elastic as we make locational decisions, capital investments, and other medium-run commitments that take into account the expected short-run marginal costs. That is, if gas cost $10 a gallon we would have no choice but to pay it in the short-run but eventually we would have smaller cars, smaller homes that were closer to work, make greater use of batteries rather than liquid fuel, and generally have different lifestyles and technologies that made less intense use of gas.