If the US government put a dollar a gallon tax on gas, what do you would happen to retail and wholesale prices

Question

edit: what do you THINK would happen

How would oil companies react.

I mean a additional tax. I am not in favor of a new tax, but some people are, and I am wonder how the tax burden would be split between consumers and producers.

Answer 1

most states do have around 50 cents/gal tax on gas already. At least in Ohio, that money is earmarked for highway improvements and other roadway maintenance.

unfortunately, any federal taxes applied to gasoline are going, at least in part, right back to the oil companies, because, for whatever reason, we are still subsidizing the oil industry.

edit:
i guess i didnt actually answer the question as posed. well here goes.
I am making the assumption that the tax youre asking about would be placed only on retail sales of gasoline. Thus, there would be little effect on the wholesale price of gas. The retail price would immediately jump. I dont think it would increase the full dollar of the tax at first. Oil companies would probably take most of the new tax burden at first, raising price only 30-40 cents overnight, in order to avoid the major consumer price shock that would occur with an immediate one dollar hike. but you can bet that over the course of 4-6 months, that price will have increased the full dollar, and the tax burden will fall squarely on the shoulders of the consumer. and as i said in a previous answer, short run (in this case probably anything under a year) demand for gas is almost perfectly inelastic.

Answer 2

Obviously, the price we pay at the pump will go up and that is inflationary. However, the answer is not quite as simple as that and it has it's pros and cons.
Cons first: It causes prices of everything we pay to go up, causing short term pain. If the taxes are used for more govt. spending and entitlements/subsidies, then it is of no gain to society as a whole.
Pros: While there will be a short term strain on our wallets, it will force society to conserve and make our prices more competitive with what the rest of the world pays. The advantage is that, like in the 70's, the demand for fuel efficient cars will increase, resulting in lower demand for gas in the long run. Higher prices will actually spur meaningful alternatives, and I do not mean ethanol, which provides a lot less energy than gasoline. If this tax revenue was earmarked for meaningful research in alternative energy sources such as solar, wind, and other non or less polluting forms of energy (i.e. electric or hydrogen powered cars), then it will all be worth it in the long run. This could yet create more jobs if we were at the cutting edge of alternative energy technologies. In addition, this tax could be considered a good tool in behaviour modification for those who choose to drive larger cars since they can "afford" it, to the long term detriment of society.
Alas, we need the political will to push this sort of tax through and make sure that the revenues are used wisely in order for all of us to benefit from it.

Answer 3

They already get about $0.48 per gallon... geez.. The government actually gets more money than the oil companies (10-13 cents per gallon) So if the Government added another dollar it would have an adverse effect on the economy. But then again it would put us on par with much of the world where they are paying three bucks for a liter.

Answer 4

If the gas prices go up, everything else go up. You need gas for the car, truck, van, plane that picks up goods to be sold in stores, so i can bet that if i were to pay a dollar tax for gal on gas i will pay even more for that gallon of milk, pair of shoes or even that purse that i put my eyes on last week and did not get cause i thought it was too expensive. Oh by the way, did i mention that i would be driving much less?

Answer 5

Prices for merchandise that is more difficult to transport would rise the most.
The price of bottled water would go up, but most drinkers would not stop buying it.
Businesses would try to produce things closer to the markets where they are sold.
This would reduce fuel use and allow the government to reduce the income tax.
I like your idea.

Oil companies prefer not to have their product taxed.
They would send their lobbyists to complain and maybe stop donating to the campaign funds of the politicians that started the tax.

Answer 6

you either forget or do not know that most states already have up to 55 cents per gallon tax on unleaded gasoline. most transportation companies use diesel gas because it is, historically, cheaper, runs cleaner, produces more horsepower and the tax on that is less, and there is no tax on gas used for agricultural purposes. but if the tax was raised, the price of everything else would go up. raise one thing somewhere along the chain, and everything else after that goes up.

Answer 7

Aren't some of us already paying about, or more than a dollars worth of taxes for a gallon of gas already?

The real question is, where would that dollar end up being spent?
I am sure it wouldn't go to alternative/cheaper fuels.
Maybe to the congressional retirement fund, or maybe a trip to Aspen for some skiing.

I would rather keep my dollar and spend it where I choose.

Answer 8

Prices would initially go up a dollar and gradually drop as demand drops.

Answer 9

The government would have to consult the oil companies first to get their OK's. They won't give permission to any governmental move unless they profit hugely.