Fuel Tax the United States

Fuel Tax

The United States federal tax and subsidy policy concerning fuel usage and production is a policy that affects the U.S. economy, the global economy and, on a daily basis, millions of citizens living on this world. Needless to say, the policy affects more Americans than any other nationality, but the indirect effects can be felt in other nations as well. The recent run-up in fuel prices is a clear example of how the U.S. fuel buying habits can be disruptive to the American economy. Having to pay higher fuel prices at the pump leaves fewer dollars in the consumer's pocket for other purchases. Higher fuel prices also means higher prices for other products as well. Since shipping costs are an expense that must be figured into the price charged for other consumable products, when it costs more to ship, it costs more to purchase products such as food and clothing.

Such expenses are a primary reason why the United States has a policy that attempts to bring about independence from the fluctuations in the fuel market and "current federal energy tax policy is premised in large part on a desire to achieve energy independence by promoting domestic fossil fuel production" (Hassett, Metcalf, 2008, p. 45).

Additionally, the U.S. is concerned over the control exerted by those foreign countries we purchase from. Hassett's article extolled "the concern over U.S. vulnerability to the disruption of supply by the Organization of the Petroleum Exporting Countries (OPEC) is understandable, given the fact that the United States imports over 60% of the oil it consumes each year" (Hassett, p. 46). If those supplies were suddenly curtailed the effects on the U.S. economy could be devastating.

The key to solving this dependence on foreign oil is to produce enough fuel to meet our demands. This can be done be producing oil and gas, or it can be done by creating new forms of energy to replace the current oil and gas usage. One of the fuels currently being investigated is ethanol, which is produced with corn. Subsidies and tax breaks from the government in the form of billions of dollars are provided companies on a yearly basis as incentives for producing these alternative fuels, including ethanol and drilling for oil. These taxes are in part paid for with taxes on each gallon of gas purchased by American consumers. Many of the taxes are levied by the federal government, and some are levied by state governments. These taxes can add up to.54 cents per gallon of gas. These tax dollars are then used to maintain and build roads as well as to offset costs of other forms of transportation.

In the drive to discover new fuels and cheaper alternatives to driving the fact of the matter is that roads will still have to be maintained, and if the consumer is purchasing less fuel by driving fuel efficient cars, then other taxes will have to be raised or implemented to pay for the roads.

A recent study concluded that "more efficient cars and trucks still take up space on the highways and wear them out. Growth will require more highway capacity. Since we finance transportation primarily through dedicated taxes, these need to be ample enough to support these needs" (Petersen, 2007, p. 66). The taxes seen in America are not as high as the ones imposed on the European consumer.