Friday, August 10, 2007

Should we preferentially tax premium gasoline? How evil would that be?

What fraction of premium gasoline sales are an evil exploitation of the weak minded?

Here's why the question matters. Most rationalists believe we need a carbon tax to keep our planet's climate within a familiar range, and we know we have a $1.5 trillion dollar infrastructure bill coming due just as we boomers prepare to suck the young dry. So most rationalists would say a carbon tax now, starting with a gasoline tax increase, makes scientific, political and economic sense. On the other hand, many rationalists, due to ethical impulse, a desire to survive, or an aesthetic aversion to starving masses, prefer to avoid exploiting the weak and gullible. If we add up a carbon/gasoline tax, infrastructure repair, and the duty/wisdom of the strong aiding the weak, should we preferentially tax premium gasoline?

The answer depends in part on what percentage of premium gasoline sales are a scam perpetuated on the weak minded:

Fact or Fiction?: Premium Gasoline Delivers Premium Benefits to Your Car: Scientific American

....Most modern cars, however, are designed to employ a specific compression ratio, a measure of how much room is available to the fuel when the piston is at the bottom and the top of the cylinder. This compression ratio—somewhere in the neighborhood of eight to one—tolerates lower octane fuels (such as regular gasoline, good old 87 octane) without knocking. "The compression ratio is fixed by the designer of the engine," Green says. "The regular fuel will burn properly and the premium fuel will burn properly and therefore there is no reason you should pay the extra money." High-performance engines, such as those in some sports cars or older, heavier automobiles, often boast much higher compression ratios. These cars—for example, Shepherd's Subaru WRX—require premium gasoline and will definitely knock without it. "I have to put the 92 octane in," he says. "It has a turbocharger."...

...for standard cars on the road today, purchasing premium gasoline is simply paying a premium for a fuel that delivers no added benefits. "If you think you need it," Green says, "you're being very eccentric.

So collector cars and sports cars (and lawn mowers? motor cycles?) need premium gasoline. These are not requirements for modern economic survival -- they are luxury items. That would favor a preferential gasoline tax on premium gas. On the other hand, we know a significant fraction of premium gas sales are an exploitation of the naive, the gullible, and the weak. That seems to argue against a preferential tax -- but in fact I think it supports a preferential tax. I bet that within days of announcing such a tax, the vast majority of consumers who don't need premium gas will learn that they've been conned, and they'll stop using it. So a preferential tax won't raise all that much money (we have to tax all gasoline), but it will serve a social good anyway. It's worth doing.

Incidentally, there's another question I haven't asked. Would we be wiser to equip our cars with floatation devices and spend our carbon tax money on avoiding war with China, solar energy research, "rationalizing" the tax code, meteor impact prevention, biowar prophylaxis or any of a hundred other worthy causes? Ahh, well, I'll save that one for another day.

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