Is Now the Right Time to Raise Gas Taxes?

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By Jacob Maslow

Pretty Woman pumping gasUsually, a tax is easy to detect. You only need to look at the price of a product and see the impact a new tax would have on the amount of money you have to pay. Pretty simple and straightforward.

Well, due to the sharp decrease of prices at the pump all across the United States, many state legislatures are tempted to sneak in gas taxes. They think that since gas prices are dropping so rapidly, even if they were to slap on a small gas tax, consumers won’t feel the sting. This is a sneaky analysis but there are serious factors on the ground that would justify such a move.

Normally, if the economy is weak, you don’t want to impose a tax burden on consumers. A tax after all is an economic penalty. You tax something if you want people to cut down on a particular activity. Taxing economic activity has negative impacts on overall economically beneficial activities like investments. Investments can lead to hiring and hiring grows the economy. See the connection? Historically, taxes have not been revenue-raising devices but are actually viewed as punishment.

Now that the economy is recovering and there are more jobs, this may be a wise time to raise taxes. The problem is finding the discipline to make sure that taxes are low enough so that they don’t hamper economic growth. That is the million-dollar question. Raising taxes now is a good idea but the problem is determining how much. Considering how money-hungry local and state governments are, finding the answer is not going to be easy.

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