Dobbs: Mankiw (Bush Economic Advisor) recommended 50 cent gas tax in 1999

http://post.economics.harvard.edu/faculty/mankiw/columns/may99.html

Fortune issue: May 24, 1999

ECONOMICS

Gas Tax Now!

First Principles

By N. Gregory Mankiw

<snip>

Many members of Congress have been pushing for a cut in income taxes, but they've been unsure how to pay for it. Fortunately, I've figured out an answer: with a tax increase. Let's cut income taxes by 10% and finance it with a 50-cent-per-gallon hike in the gasoline tax.

Supply-siders have long argued that income taxes reduce the incentive to work and save, and thus depress economic growth. About this, they are exactly right. In the past, however, some supply-siders pushed their arguments to ridiculous extremes--claiming, for instance, that tax cuts would generate so much growth that they would be self-financing. The experience of the Reagan years put this theory to rest, but it should not cast doubt on the more modest view that lower income tax rates would be good for the economy.

Another benefit of a rise in the gas tax would be a reduction in the size of vehicles. Whenever a person buys a large car or a sport-utility vehicle, he makes himself safer, but he puts his neighbors at risk. According to the National Highway Traffic Safety Administration, a person driving a typical car is five times more likely to die if hit by a sport-utility vehicle than if hit by another car. A gas tax is an indirect way of making people pay when their massive vehicles impose risk on others, which in turn makes them take account of this risk when choosing whether to buy some monster urban-assault vehicle or go with a sensible compact.

A common fear about the gasoline tax is that it might fall disproportionately on the poor. Yet that is not necessarily the case. A 1991 study by MIT economist James Poterba called "Is the Gasoline Tax Regressive?" concluded that "low-expenditure households devote a smaller share of their budget to gasoline than do their counterparts in the middle of the expenditure distribution." Moreover, if Congress were to use a hike in the gas tax to pay for a cut in income taxes, there is nothing to stop it from cutting tax rates on lower incomes more than on higher incomes.

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N. GREGORY MANKIW is an economics professor at Harvard and the author of Principles of Economics

(outsourcing) to Bush-bashing. THat's one GOP vote for us this November, I think.