Why is gasoline so heavily taxed worldwide?

Answer 1

Federal, state, and local taxes on gasoline consumption, both in North America and on a worldwide basis drive up the cost of this fuel fro several reasons.All governments require a steady flow of income. Gasoline usage is easily measured and predictable

allowing for governments to base part of their budgets on the sales taxes generated by gasoline sales.

To increase revenue, even a small increase on gasoline sales taxes, will normally not meet with much consumer resistance. This is of course predicated on the assumption that taxes on this fuel are not already overbearing. Governments realize that gasoline taxes are regressive in nature. Gasoline consumption and its costs affect all levels of society. With that said, it seems that even so-called progressive governments seem not to be concerned that low wage earners suffer the most when taxes on gasoline are simply too high. How high is high is another question that cannot be answered here.

Taking the United States as an example, gasoline taxes are nearly half the cost of a gallon of gasoline. Taxes in European nations even exceed that of the US and Canada.

In dealing with this reduction of real income in the US, governments are quick to point out that consumers can escape regressive gasoline taxes by using public transportation whenever possible.

On a totally different level, meaning that gas taxes are not specifically geared to raising government revenues, there is the concept that these taxes are leveled at reducing certain negative externalities.

In such a case the gasoline tax is called a Pigovian tax. This changes the talking points to justify the sales tax on gasoline. Generally speaking, most consumers have no idea what a Pigovian tax or what negative externalities mean.

In the real world, this is often exactly what a government is trying to do. Even the term of "Pigovian" sounds unpleasant. Economists and politicians avoid the use of name of this tax and what negative externalities mean.

The negatives of driving are associated with the following problems:

A. Congestion- The bumper to bumper traffic jams are partially solved by reducing the number of vehicles on the roads. This causes delays and often aggravation for drivers.

B. Accidents- Vehicle road accidents cause death and injuries, and cause car insurance rates to rise. Many drivers purchase "sport utility" vehicles to avoid injuries from accidents. The higher and larger vehicles provide a degree of safety for their owners and help driving in bad weather such as snow and ice. In the US, the National Highway Safety Administration has done studies that show that drivers of regular cars are five times more likely to die in a crash with a sports utility vehicle. The taxes on gasoline is an indirect way of "balancing out" this situation in that these gas guzzling vehicles are expensive to fill up ar the gas station.

C. Pollution- This was alluded to earlier when speaking about traffic congestion. Clearly the results of these traffic jams increase carbon emissions which endanger the health of drivers and pedestrians. The fewer the number of cars on the road helps improve air quality by reducing pollution and helps the overall environment as well.

In conclusion, gasoline taxes, rather than creating so-called dead weight taxes, as most taxes are, become lessened by the Pigovian tax. This tax helps reduce the negative externalities of extra road traffic and air pollution. To see this more clearly, income taxes or tariffs on imported goods do not necessarily produce a solution to these negative externalities.

Answer 2

Easy revenue for the government, and they know that people will continue buying it. As the adage goes, 'when you've got them by the balls, their hearts and minds will soon follow'.