Gasoline Taxes in the United States - Essay Example

Economics of the of the Number Economics Introduction In the contemporary complex economic circumstances,the world economy experiences various incidents, occurrences and policy changes on everyday basis. As it is difficult for individuals to obtain news regarding such economic incidences and keep a track of the progression of such issues, various journals and news papers such as The Economist Magazine, The New York Times and The Washington Post facilitates the individuals to acquire information regarding such economic occurrences. In this paper, the debate regarding gasoline taxes in the United States, as published in The Washington Post will be analyzed in order to recommend whether the tax should be changed or not. In the next segment of the paper, the cause and benefits of Trans Pacific Partnership related to international trade agreements that has become the headline of The New York Times will also be examined. Discussion Gasoline Taxes in the United States As per the reports of The Washington Post, the gasoline tax has been static at 18.4 cents per gallon since 1993, as no Federal government has taken initiatives to increase the tax rate in last 20 years. However, as the oil price dropped by 40% in June 2014, many states considered reviewing the rate of the long-static federal gasoline tax. However, such increment in gasoline tax rate involves certain pros and cons as well as economic consequences (Ferguson 153). Pros of Increasing Gasoline Tax As per the newspaper report, the most important benefit that the US economy will experience from increasing gasoline tax can be attributed as the potential environmental benefits which may arise from decline in use of crude oil and gasoline. The rationale is based on the connotation that, in case of a higher tax on gasoline and its sub products, the citizen would opt for alternatives such as public transportation instead of personal car that will definitely bring social benefits in real sense. Moreover, as the total revenue obtained from gasoline tax is utilized in the Federal Highway Trust Fund, the Congress is planning to contribute the additional money accumulated from the incremented tax rate for the purpose of reducing budget deficit. The US government is also of the opinion that as increment in the US gasoline tax will encourage the citizen for using alternative sources of energy; such initiative will reduce dependence of US government on the largest foreign suppliers of crude oil, OPEC which in turn will bring higher stability in the entire American economy. According to the notion of Ex President, Mr. George W. Bush, high level of dependency in turn jeopardizes the economic growth to a great extent and hinders the national security as well. An increase in federal gasoline tax will definitely discourage the consumption of gasoline products by the US citizen which mainly comes in the form of transportation (Kotschwar, Barbara & Muir 56). It has been noticed that with approximately 5% of the total global population, the country consumes more than 20% of the oil supplied in the whole world only because a higher per capita income and higher number of cars per person. Therefore, reduction in personal transportation will in turn reduce congestion in the urban area and diminish emission of carbon dioxide as well. Therefore, from the above analysis, it is evident that increase in the gasoline tax rate will bring long-enduring benefits to the US economy (“Five myths about gas taxes”). (“The gas tax has been fixed at 18 cents for two decades. Now would be a great time to raise it”) Cons of Increasing Gasoline Tax However, the reports have also specified that increase in any tax rate including gasoline tax may result in political suicide for the congressmen. Therefore, in spite of constituting multiple economic well-beings, considering the history of punishing the political parties for increasing tax rate, no “political will” can be experienced for increasing the tax rate in the near future. In fact, as the per capital consumption of oil consumption is very high in the US, experts are worried that additional burden for increase in gasoline tax will be borne by the middle class of the economy only. This regressive nature of this tax may affect the stable equilibrium of the economy in the long run (Parry, Morris & Williams 234). May economists are of the opinion that the demand for gasoline is inelastic in nature (Parry, Morris & Williams 234). Though some of the experts have shown the benefits of increasing tax rate in terms of lower contestation, environmental pollution and a lower dependency on foreign parties, however, the truth is that in order to realize all such benefits, the demand for gasoline should be considerably reduced. However, the demand for gasoline being highly price inelastic, it can be expected that there will be no significant change in the demand for gasoline with an increment in its price level. Therefore, it will be difficult to capitalize the planned benefits through increasing gasoline tax. Additionally, it is also feared that increase in gasoline cost will enhance the manufacturing, retailing and shipping cost as well where it is used as a medium of production. Therefore, increase in gasoline tax will create double burden on the citizen through an increase in price of other goods and services as well (Parry, Morris & Williams 234). Trans Pacific Partnership The Trans Pacific Partnership (TPP) is a regulatory treaty regarding agriculture, trade & investment as well as intellectual property right at the regional level of 12 nations in Asia Pacific. As per the reports of 2014 published in New York Times, the participating countries are as follows: Australia,  Brunei,  Canada,  Chile,  Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. However, this partnership has raised a conflict due to a number of issues associated with the treaty (“Why the Trans-Pacific Partnership Matters”). Benefits Associated with Trans Pacific Partnership (“The Trans-Pacific Partnership Trade Deal: What It Would Mean”) The Trans-Pacific Partnership (TPP) agreement was structured in such a manner that will aim to accelerate economic growth through expanding foreign investment possibilities in the above mentioned countries in Pacific region by eliminating trade barriers. Objective behind such expansion of cross border trade of goods and services can be attributed to attaining the scope for higher job creation in this region and improving intellectual property protection. Once implemented properly, trade agreement between the United States and the Pacific nations will constitute for more than 15% of the global trade and 40% of the US import and exports. Naturally, US will be benefitted to the maximum (“The Trans-Pacific Partnership Trade Deal: What It Would Mean”). (“The Trans-Pacific Partnership Trade Deal: What It Would Mean”) The high- standard trade deals to be maintained by the giant TPP is also expected to be responsible for 40% of the aggregate GDP (Gross Domestic Product) and 26% of the global trade. Excellence in the trade agreement lies in the effort of the agreement to encompass a broader range of legal and regulatory issues in terms of foreign policies related to trade and investment, rather than concentrating only on exchange of goods and services across countries in a situation where the environmental and labor standards are met. All such considerations have made the treaty most attractive and point of concern. Drawbacks of Trans Pacific Partnership Though the pact has gained considerable attention of economists for its future capability of yielding major chunk of revenue for the whole world, as per the reports of New York Times, the treaty may prove to be pivotal for the Asian countries. According to the report, such suspection is the main reason for big economies like China to remain reluctant regarding the treaty. Moreover, the parties engaged in this treaty have maintained a high level of secrecy that has appeared to be abnormal to many experts (Lim, Elms & Low 49). In fact, even before implementation of the pact, the involved countries have started fighting over various issues such as the US imposing a very strong intellectual property right, limited public sector support for state owned enterprises for promoting competition, prevailing tensions between the US and Japan regarding the control of agricultural sector, imposition of trade restrictions on tobacco business etc. Conclusion From the above analysis regarding the US gasoline tax, it can be inferred that though the politicians are raising a number of objections against increase of the long-static gasoline tax in order to safeguard their political positions, the result of opinion polls have clearly shown agreement of 67% of the US citizen for increasing tax in this particular segment. Rationale behind increasing the gasoline tax rate can also be justified by showing that as the automobile companies are coming up with fuel- efficient engines, it is expected that over the next decade, the cars will start giving double mileage at the same expense on fuel. Therefore, an increase in gasoline cost can be offset on account of better fuel efficiency. In such circumstances, considering the other benefits as well, the United States must increase the gasoline tax. Regarding the Trans Pacific Partnership agreement, though the treaty should be implemented as soon as possible, eliminating all the hindrance that are restricting the pact to start functioning, clarity should be brought in a lot of aspects of the agreement so that the concerns of the Asian countries can be secured and US cannot exploit the resource and capabilities of such countries in the name of business. If the agreement can be implemented in restrictive circumstances, it will also bring long enduring benefits for the whole world. Works Cited Bledsoe, Paul. “Five myths about gas taxes”. The Washington Post. The Washington Post., 19 December 2014. Web. 6 June 2015. Mooney, Chris. “The gas tax has been fixed at 18 cents for two decades. Now would be a great time to raise it”. The Washington Post. The Washington Post., 3 December 2014. Web. 6 June 2015. Granville, Kevin. “The Trans-Pacific Partnership Trade Deal: What It Would Mean”. The New York Times. The New York Times., 11 May 2015. Web. 6 June 2015. Roger C. Altman & Richard N. Haass. “Why the Trans-Pacific Partnership Matters”. The New York Times. The New York Times., 3 April 2015. Web. 6 June 2015. Ferguson, Jake. Major Themes in Economic. Berlin: Springer, 2007. Print. Kotschwa, Schott., Jeffrey J., Barbara Julia Muir. Understanding the Trans-Pacific Partnership. Washington DC: Peterson Institute, 2013. Print. Lim, C. L., Deborah Kay Elms & Patrick Low. The Trans-Pacific Partnership: A Quest for a Twenty-first Century Trade Agreement. Cambridge: Cambridge University Press, 2012. Print. Parry, Ian., Adele Morris & Roberton C. Williams. Implementing a US Carbon Tax: Challenges and Debates. London: Routledge, 2015. Print. Read More