Ron Paul's Texas Straight Talk - A weekly Column

July 17, 2000

High Taxes Cause High Gas Prices
Gas Tax Relief Will Benefit Consumers Immediately

Consumers throughout the 14th district of Texas and Americans everywhere have felt the impact of higher gasoline prices during the past year. In response, our government officials have offered up the usual "solution": greater regulation of the oil industry. Administration officials have ordered an FTC antitrust probe, while vote-seeking politicians have condemned the oil industry and called for an investigation into collusion and price gouging. The truth is that costly federal taxes and regulations largely are to blame for high fuel prices, not convenient scapegoats like OPEC and the oil companies. I co-sponsored legislation in March that would immediately address the real problem: exorbitant gas taxes.
The obvious way to reduce the price that consumers pay for gasoline is to reduce fuel taxes. Federal taxes account for nearly 20 cents per gallon of gasoline sold. State and local taxes bring the total to 42 cents per gallon. Thus, while the cost of crude oil is roughly 70 cents per gallon (based on the current cost of $30 per barrel for OPEC crude oil), the "cost of politicians" is 42 cents! In fact, over 43 different taxes are imposed on the production and distribution of gasoline by various levels of government. The pre-tax price of a gallon of gasoline barely has changed in the last decade, hovering around 88 cents throughout the 1990s. The real increase has been in various taxes: in 1990 consumers spent only 27 cents per gallon in taxes (as opposed to 42 cents today). At the same time, EPA regulations (such as those requiring new reformulated gasoline) add significantly to the cost of fuel production. Analysts estimate consumers would save a whopping $67 billion in one year if gas taxes were eliminated. Clearly, we need to end the smokescreen and stop blaming oil companies for high prices that have been caused almost entirely by huge increases in fuel taxes.
The call by administration politicians for an investigation of high gas prices is particularly inconsistent, because the current administration routinely has supported energy taxes and EPA regulations which directly increase the price we all pay at the pump. Of course, politicians love to respond to pressure that they "do something" about high gas prices, regardless of the hypocrisy involved. Unfortunately, they never do the right thing by eliminating or reducing the taxes that cause high gas prices to begin with.
Fortunately some of my colleagues in Congress agree, and have joined me in co-sponsoring legislation that reduces or places a moratorium on federal gas taxes. H.R. 3844, which I co-sponsored back in March, calls for a total repeal of federal gas tax increases imposed in 1993. H.R. 4111, which I also co-sponsored in March, mandates a six-month suspension of federal gas taxes while maintaining the repeal of the 1993 tax increases. A new bill I support, H.R. 4776, suspends federal gas taxes through March 2001, and requires the Secretary of Energy to report on the economic feasibility of maintaining the reformulated gas mandate imposed by the Clean Air Act. All of these bills would provide immediate relief to consumers at the pump, especially during summer months when many families drive long distances on vacation. Beneficial effects would be felt throughout the economy, as retail costs are directly affected by fuel costs borne by the trucking and air freight industries in shipping retail goods.
Of course, eliminating gas taxes will not eliminate all fluctuations in gas prices. Some fluctuation occurs as the normal result of supply and demand forces in the market. Americans can take partial responsibility for their gas bills by driving fuel-efficient automobiles. Also, we should be willing to explore new domestic oil sources to reduce our need to buy oil abroad. However, politicians should be held accountable for true cause of high gas prices: massive increases in federal gas taxes.