Word slipped out yesteday that Obama's got a $175 billion stimulus plan to revitilize the US economy. Much like the public works projects of the Great Depression, Obama wants to dedicate most of the money to building better new transportation infrastructure with significant funds also to be allocated to alternative energy sources. It is a great idea and could put people to work and get the US focused on necessary transportation solutions for the future (high speed rail, etc.). Unfortunately, he doesn't know where the $175 billion is going to come from.
Just as Europe has moved ahead of the US in transportation, we need to look at funding this new transportation initiative the way that they do. It won't be popular, but the only answer is to raise taxes - to tax existing inefficient use of transportation to pay for our plans for the future. It isn't going to be popular politically today, but forcing the US to swallow a bitter pill will make Obama the hero of future generations.
Here's how I propose that it works. The obvious first target is a Federal gasoline tax. Even with gas at $4 a gallon, Americans were consuming 180 billion gallons of gas a year. Each penny of a Federal gasoline tax would generate $1.8 billion a year. A dollar tax would generate $180 billion, paying for this program entirely, without bringing gas prices near where they were 4 months ago. Two dollars would generate $360 billion, paying for this program and much of TARP, and, if gas remains at $55/barrel for two years, will not set gas prices too far above where they were just recently.
Additionally, I would note that each penny charged to Americans to drive on highways would yield over $33 billion per year. I don't like this as much because it doesn't promote efficiency the way that a federal gas tax does.
Although not palpable with GM and Ford on the verge of bankruptcy, a 1% tax on new automobiles would generate over $8 billion per year in tax revenue.
I know that this is all controversial. I know that Obama would be perceived to be stabbing his constituency in the back (he isn't taxing the wealthy with this, but he is taxing the poor who depend on driving and driving inefficieny cars - often because they cannot afford efficient ones). But, it is the right thing to do. Europe has a lot of problems and shouldn't ordinarily be a role model for the US. But, these aren't normal times. And, as we move towards an efficient transportant infrastructure that they have, we need to pay for it through taxing of our old inefficient transportation vehicles and habits.
(This is my first article on BestCashCow.com, although I have enjoyed reading Sam Cass, JRodgers and others. I hope that readers will engage me in a polite discourse about my ideas, and that we can keep this profession. BestCashCow.com seems to have good, profound discussions, unlike what I see on other forums).