Higher Oil Taxes Would Lift the Economy

President Barack Obama this week reaffirmed his desire to tackle the U.S. budget deficit through “a balanced mix of spending cuts and more tax reform.” As lawmakers in Congress search for ways to do this, they should take a new look at raising oil taxes. Even if they don’t believe that the U.S. consumes too much oil, they will find that incorporating higher oil taxes into a broader deficit package can make strong economic sense.

The U.S. levies small taxes on gasoline, diesel and jet fuel that add up to less than $10 on each barrel of oil consumed. Yet increasing any of these taxes has long been politically toxic. The result, once inflation is factored in, has been a steady drop in the tax rate on oil use.