Sunday, January 08, 2006

Energy and American Consumption

This Author has just read a Country Analysis Brief of the EIA on Iran. Iran is still running deficits because they subsidize Gasoline to Consumers, it selling at about $.40 per gallon, with excess consumption due to the low Price of about 15%. Iran, though, is about to introduce Consumer Charge Cards alongside a two-Price system, where Gas is subsidized only to a specified quantity, then the subsidy is removed. The Concept of the Two-Price system excited the Author's imagination.

A Plan could be implemented where all Tax be removed upon some fill-up quantity of Gasoline, with much heavier taxes imposed on the remaining Gas drafted each time at the Pump. The tax revenue raised could be Origin-specific: These taxes revenues could be directed, after payment of State taxes on the Fuel, to maintenance of the Refinery system of this Country.

What type of tax levels are envisioned?
Elimination of all taxation upon the first Seven (7) gallons of Fuel, with a $.70 per gallon taxation on Gasoline above each extension of this limit (at the Pump). Diesel fuel would be left with the same tax rate. The Federal Government would have to pay approx. $.30 per gallon to the States to replace lost tax revenues, with the remaining $.40 per gallon taken by the Federal Government and loaned to viable Refining capacity Operators to build new, or expand existing capacities. The governing enactment would further entail no tax revenues could be spent by Government, except after repayment of the extended credit to Refiners, who would have to pay Two percent interest on the extended loans.

What would the Plan accomplish?
The Author has no hard numbers, so cannot give a good portrayal. The Subsidy on the first 7 gallons would be a Welfare transfer to All who would utilize it; Unemployed and Welfare receiptents possessing the time to double or triple trips to the Pumps. This Subsidy would cut their Fuel Costs substantially, while the Plan would not affect Heating fuels. Everyone else would pay the added taxation, which would propel purchase of more fuel-efficient vehicles. The Refining capacity of this Country would be economically stabilized, while current Federal taxations on fuel would remain in place at the Importation and Distillation levels. lgl

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