WorldCity Business Magazine

Priming the pump

by Ken Roberts

Unusual times call for unorthodox measures.

WorldCity heads later this month to Houston, the third in our series of six cities where we are unveiling TradeNumbers events and publications.

Houston is a boom town again, thanks to the high price of oil. In dollar terms, it was the fastest-growing Customs district in the nation last year. Oil companies are making record profits.

I’m feeling the pain at the pump. My guess is you are, too.

I’m feeling it personally when I fill up. But WorldCity is also feeling it: We have given the third increase in a year to the drivers delivering copies of WorldCity to more than more than 1,400 locations.

Oil, that wonderful lubricant, runs the risk of becoming sand in the gears of the U.S. economy and, by extension, the global economy. So what I am proposing might seem a little counterintuitive. We need a $1-a-gallon federal gas tax.

Richard Nixon, the staunch anti-communist, opened the doors to China and Russia in the 1970s. Bill Clinton, a Democrat, took on welfare reform in the 1990s. And now George Bush, a former oilman, needs to take on oil. And he needs to do it in more than words.

In exchange for paying $1 more at the pump, we need to reduce by an equal amount the withholding taxes on our paychecks. I will leave this to the economists to calculate, but the formula should be based it on average mileage and average consumption figures, thereby giving credit to those who drive less or drive more fuel-efficient cars.

The idea is not to change what we pay but how.

Businesses would benefit since their match of employee withholding would be reduced. There’s a stimulus in there.

But what about businesses that have trucks on the road, planes in the air, employees who fly regularly?

Since they, too, would be paying this higher gasoline tax, they would need to see a shift in their taxation. But here are two key differences. First, the policy here should not discourage the use of trucks and planes or business trips. Second, consideration should be made to the fact that fuel usage varies, depending on type of business and size.

The most immediate way perhaps the only immediate way to negate the impact of the additional tax would to apply fuel-expense credits against the withholding taxes that companies pay.

Again, the federal government would continue to receive its revenues, and companies and individuals would continue to pay them. The only difference is that the United States would be sending a clear message to the Middle East, to Venezuela and all our oil providers that we are ready to look for alternatives.

Oil is great when it’s a lubricant, not so great when it is sand in the gears.