Impose higher federal and or state gasoline taxes now.  Ok, I said it.  Call it a ‘Green Fee’ if you want.  Call it anything you want, but provide funds to continue the recent progress toward a greener economy.

Some background and assumptions which I used in recommending this;

BACKGROUND

The federal gas tax has been in place since 1932.  Contrary to popular belief, all monies do not go to highways or infrastructure, in fact that didn’t even start until the 50′s, prior to that it was used to fund wars.  Since 1980 the tax has increased dramatically from 4cents to 18cents per gallon.  Yet, we still have a call from Obama and congress for Infrastructure spending for roads, bridges and the like.  What have you been doing with the money Congress? Another post on that topic.

Starting in 1919 with Oregon, states started to get on the bandwagon with this new tax approach.  All states have some type of tax, whether it is a gas tax, sales tax, or excise tax (call it what you want) on gasoline.  Here is a map with all states combined taxes on gasoline from http://www.taxfoundation.org/publications/show/1054.html

On average around 40cents per gallon and $281 per person per year.

ASSUMPTIONS

1. The US economy and consumers can handle a gasoline price of $3.50 per gallon without substantial economic slowdown
2. The price of Gasoline will fall below $3 per gallon by the end of the year.
3. Funding of green initiatives from both candidates will be delayed due to funding for the economic crisis and the continued war
4. The government, federal and state, has limited spending discipline with gas tax revenue
5. Higher retail gas prices encourage a ‘green consumer’

PROPOSAL

Impose a scaling green fee on gasoline prices. The fee would scale with the underlying per barrel of oil price.  As oil prices fall the fee increases, as it increases the fee would decrease.  The intent is to maintain a retail price around $3.50 per gallon.  The federal government would collect the fee.

Pay the Federal government a processing fee of 10% for collecting and enforcing the collections.

On a quarterly basis, the federal government will distribute the funds to an agreed upon ‘Green Investment Council’, which is managed by US Venture Capitalist firms.  Investments are made by this council in ‘green’ technologies and companies that meet the specific goals of alternative energy production, job creation, and investment return.  The overriding goal is investment return as it is with most Venture capitalists.

At no time will these fee funds take a majority position in any company, all use of these funds need to be along side private investment and will be non-voting shares.  Funds will be managed similar to the way investment funds are managed now. Contributors buy into an investment fund, expecting a return.  The revenues from this fee will be treated the same.  Congress will sit at the table as the investor.

In this way the Government is directly investing the fee from consumers in ‘Green Technology’, not funding wars or social security or corporate greed, or whatever they have been spending money on lately.  It is similar to a charity that can prove that the monies go directly to the recipient and not to the bureaucracy.  I would rather give money to those charities.

If ideas such as the Cash for clunkers http://mygreensuit.com/2008/08/03/cash-for-clunkers/

or Conservation Corps http://mygreensuit.com/2008/04/07/conservation-corps/

or Incent to Invent http://mygreensuit.com/2008/04/07/incent-to-invent/

have any standing they will need to prove themselves to the ‘Green Investment Council’

SCOPE

At current prices of $3.29 we are talking about a 20cent fee, which would equate to around $25 billion annually in the investment fund.  If the gas price actually reflects the falling oil price then we would double the investment amount per year to $50 billion.  This money, in the right hands, and please understand, Congress is not the right hands, would go a long way in funding businesses that can meet the environmental objectives, provide jobs and get the job done quicker than any government run program.

The old tax’em when they are doing ‘too well’ government philosophy, is back in Washington D.C.  The recent calls for a windfall profit tax against the oil companies certainly doesn’t support capitalism, fair play, foreign competitiveness, or sound economic policy.  It is just plain silly.

Some facts about big bad ExxonMobil, as reported with their recent quarterly results.  Revenues of $138b, Profits of $11.9b, $7b investing in finding new oil, $10b back to shareholders in dividends or share buybacks, $10.5b in income taxes, $9.5b in sales taxes, and $12b in other taxes.

First, as a percent of revenue oil companies are not profit machines.  Under 10% profit margin? Not a huge wall street story there.  If we need to focus on overly priced, close to monopoly, under regulated, excessive profit companies, someone should be looking at Google. Second, they pay a lot in taxes now, over 30% and if you add in the fact that dividends are taxed again as income, this is even higher. Third, they are investing in research (fair to point out R&D Tax credits for this) for new oil.  I am not sure it is enough but they do owe their shareholders a return.

My proposal is to hopefully create a win-win situation.  DO NOT tax corporations and DO provide incentives toward more alternative research.  It is difficult for me to think that oil companies will become the ‘green’ companies of the future, contrary to current marketing efforts by BP and others, so Government incentives to promote research and development may be necessary.

From the article below;  http://mygreensuit.com/2008/05/13/reduce-oil-prices/

We the people, should use the Strategic Petroleum reserve as leverage.  It is a fairly simple plan, we sell 200M barrels of oil to the top 5 oil companies on a pro rated market share basis.  We sell it to them at the 90 day moving average of a barrel of oil, or potentially at a slight discount, since refining costs and distribution need to be accounted for, and we take the proceeds and invest in some of the creative alternative energy, conservation and research ideas currently swirling around.

A simple plan review, the average cost of a barrel oil in the reserve = $24.  Let’s estimate a $100 government profit on each barrel x 200M barrels = $20b for energy programs.  The oil companies get a new supplier, with reduced shipping costs (it is already here!), and they still make some profit, WIN.  The Government gets $20b to invest in alternative energy, and gets some satisfaction in making the oil companies do something they probably don’t want to – WIN.

Next post on what we should invest the $20b in.