Using Taxes to Reduce the Consumption of Oil in the U.S.

1. Using Taxes to Reduce the Consumption of Oil in the U.S. Can Taxation Change the Values of a Culture that Glorifies Consumerism?

2. Description of Policy (1):Oil Taxation • A tax on oil could reduce consumption of it by forcing individuals to bear the full costs of the activities they engage in. • Getting people to consider the impact of their behaviors is the first step in helping to develop an ethic of stewardship in the U.S.

3. Description of Policy (2):Culture Taxation • A comprehensive policy will address the general ethic of conspicuous consumption that pervades U.S. culture by taxing, and thereby discouraging, activities that foster a culture of consumption. • Target: to start, remove the tax shelters for Advertising.

4. Tax on Oil: U.S. reliance on foreign sources of oil Progress towards sustainable development Decrease in CO2 emissions Decrease in traffic Decrease in congestion Tax on Advertising: Reduction in waste Reduction in energy used to create consumer products Increased awareness of the consequences of one’s behavior, leading to more pro-environmental action. Problems the Policies will Address:

5. Why Should we Use a Tax to Change our Consumption Behaviors? Political Science 101

6. Using the Tax System as a Means to Instill Values is Not a New Idea . . . • That the tax system should operate beyond its economic parameters to reflect and even proscribevalues dates back to origins of our country.

7. Framers of the Constitution • “the taxation system is a means for shaping the national economy, bringing foreign nations into commercial terms, regulating morals, and realizing social reforms.”

8. Today, tax scholars believe our tax system has strayed too far from our society’s values.

9. Democratic Process,today Existing Cultural Values Laws/Taxes New Cultural Values, Changed Behavior Problem: our taxes promote destructive behavior

10. Democratic Process, the Ideal Art Political Process Laws Philosophy Cultural Values Literature Science Religion Technology

11. Culture: Incorporates Beliefs about the “Ends” of Life • All learned behaviors in a particular society • A framework for: • Thoughts • Actions • Behaviors • Imparts meaning to the vast majority of what we do

12. What are Our Cultural Values in the United States? • Methods of “measuring” culture: • Through our Behaviors (Objective, statistics) • Through how We See Ourselves (Subjective, opinion polls)

13. Behaviors • The average American consumer produces twice his weight per day in household, hazardous and industrial waste, and an additional half ton when gaseous wastes such as carbon dioxide are included.

14. Behaviors • U.S. merchants and producers currently spend 2 ½% of the G.N.P. on Advertising. • Per capita, that is $495 per person. • Thus, corporations spend more money on advertising than is spent on all of secondary education in the U.S.

15. Behaviors: What are America’s Most Popular Leisure Activities?

16. #1: Watching Television • In the average household, the TV is on for 6 hours and 47 minutes per day.

17. #2: Shopping • Research has shown that the more people watch T.V., the more they spend.

18. Behaviors:Work Habits • 37% of Americans work more than 50 hours per week. • Americans work more hours than any other country in the world, and the numbers are only increasing.

19. How We See Ourselves Opinion Polls

20. How We See Ourselves • 38% of Americans claim they “always feel rushed.”

21. How We See Ourselves • 70% of American fathers and mothers feel they lack enough time with their kids.

22. How We See Ourselves: Consumption • 82% of Americans agree that “most of us buy and consume far more than we need.”

23. How We See Ourselves: Consumption • 70% of Americans described the average American as “very materialistic.” • But only 8% felt they themselves were materialistic.

24. Have We Always Been Like This? Patterns of Cultural Change

25. Patterns of Cultural Change • We work six weeks more per year than we did 20 years ago.

26. Patterns of Cultural Change • What is the amount of income that you would need to “fulfill your dreams?” • 1986: $50,000 • 1994: $102,000

27. Patterns of Cultural Change • Students entering college were asked what was important in life: • 1967: • 47% said “to be very well off financially.” • 83% said, “to develop a meaningful philosophy of life.” • 1990: • 74% said, “to be very well off financially.” • 43% said, “to develop a meaningful philosophy of life.”

28. If these are our Values, then how can we Change them? • Proposed Solution: Different Taxes • (1) Oil Use • (2) Activities that encourage Consumption, an incentive to change our cultural values, and therefore, our behavior.

29. How the Tax will Operate: Laws Cultural Values Art Philosophy Literature Science Religion NEW Cultural Values & Changed Behaviors Technology

30. Policy 1: Increase Tax on Oil How will a Higher Tax Decrease Consumption?

31. Oil Use Per Capita, per year • The U.S consumes over 2.0 tonnes per capita of oil. • That amounts to: • 14.66 barrels • 615.72 U.S. gallons

32. Oil Consumption by End-Use Sector, 2000(Million Barrels Daily) .41 .77 .36 4.76 13.41

33. Based on the sectors that use the most oil, the two most effective areas in which to reduce Consumption are: Transportation Sector – 68% Industrial Sector – 24% Residential, Electric, Commercial – 8%

34. Federal Gasoline Tax began in 1932, it was 1¢ per gallon, or 6% of the price of gas. The tax has gradually risen. Today it is 18¢ per gallon, or 8% of the price of gas. Revenue from the gasoline tax goes into the Highway Trust Fund; in 2001, it received $20.1 billion. State/Local taxes are also levied, making the average tax paid on gasoline 41¢/gal, or 27% of the price of gas. Oil Tax: Tax Gasoline to Reduce Consumption in the Transportation Sector

35. Gas Tax • Because the real price of gasoline in the past 15 years has been relatively stable, consumers’ have not cared about fuel economy and have tended to buy larger, more powerful cars.

36. Gas Tax: Reduce Consumption • A well designed increase in the Federal Tax on gasoline would give consumers a direct incentive to reduced gasoline consumption: • Drive less (carpool, public transportation) • Rely more heavily on most fuel efficient car owned • Retire gas guzzling cars earlier • Buy more fuel-efficient cars.

37. Gas Tax: Cost Effectiveness • People engage in an activity up to the point at which the cost of the activity equals the savings in gasoline spending that it brings about. • The tax must cover all uses of gasoline that could be reduced at a cost lower than the tax. (Currently, gas purchased by state/local governments is exempt from the tax) • A rise in the gasoline tax should be matched by an equivalent rise in the tax on diesel fuel. • Tax must be perceived as permanent and must be adjusted to keep up with inflation.

38. How much must the Gas Tax be Increased to be Effective? • The tax must be high enough to internalize the externality; otherwise, there will be overconsumption. • For example, gasoline is taxed but the current federal and state taxes on gasoline do not approach the correct level needed for internalization.

39. Price Elasticity Models help make Predictions • Elasticity measures how responsive consumers are to a change in price. • If demand is highly elastic, a small percentage change in price will cause a large percentage change in consumption. • Gasoline is elastic.

40. Gas Tax: Current Prediction • A 15¢ increase in tax on gasoline (or a 10% increase in price, assuming $1.50 per gallon) = • Short run: 2.6% decrease in the amount of gasoline consumed. • Long run: 8.6% decrease in the amount of gasoline consumed. • Other predictions are lower for long-run projections: • Doe predicts only a 3.8% decrease in consumption.

41. Revenue Effects of a 15-Cent Increase in the Federal Gasoline Tax Total FederalRevenue Collected(Billions of dollars) Gasoline Consumption(Millions of gallons) Increase in FederalRevenue Becauseof the Tax Increase(Billions of dollars) W/out tax W/out tax W/ tax W/tax Short Term 2003 36.5 109,360 112,279 20.7 $15.8 Longer Term 2012 131,400 143,855 43.9 26.5 $19.7

42. Impact on Rural Areas: Less access to public transportation Things more spread out Oil Tax:Problems & Concerns

43. Oil Tax:Problems & Concerns • Poor: • Gasoline expenditures generally account for a larger share of average annual income for low-income households than more higher income households. • But even this statistic depends on how you measure the ratio. • Ratios projected for a household’s permanent, or long-term income, is thought to be a better estimate of the household’s ability to bear the tax over a lifetime.

44. Oil Tax:Solutions to Problems • Provide government payments to low income households. • Appropriate funds generated through the tax to developing public transportation in rural areas. • Provide government payments to farmers, as opposed to rural in-town dwellers.

45. Policy 2: Reducing Consumption Generally: Removing the Tax Shelter for Advertising Expenditures

46. Consumer life-style staples, like the automobile, high fat diets, throwaway goods and packaging, are produced at great environmental cost. Enormous and continuous quantities of energy, chemicals, metals, and paper are needed to sustain our way of life. Why Advertising?The Problem of Over-Consumption

47. Why Advertising?The Problem of Over-Consumption • The U.S. accounts for 5% of the total world population, yet we consume 30% of the world’s resources. • Our population is growing. • Ultimately, this high level of Consumption will destroy the ability of our natural resources to restore themselves. USA

48. Why target Advertising?Advertising Encourages Consumption • The average adult sees 21,000 commercials per year. • The more people watch T.V., the more they spend.

49. Why target Advertising?Advertising Encourages Consumption • Surveys indicate a positive relationship between heavy exposure to advertising and “acceptance of commercial claims, belief in ads, and desire for advertised products.”

50. Why target Advertising?Advertising Encourages Consumption • From 1950 to 1990, advertising expenditures in the U.S. rose from $198 per capita to $495. • Obviously, corporations believe they are getting something from their advertising expenditures.