Indexed gas tax will help us get serious about our energy policy

I have been wondering about a gas tax that is indexed in some progressive manner to an economic measure like GDP growth or inflation or … heck, why not - unemployment rate. Why, you may ask, would I imagine such a strange creature?

We need to be cured of our addiction to gas guzzlers, as Tom Friedman so eloquently argues in his column in NYT. Its a great piece, and should be read in its entirety, but the following paragraph struck me as especially powerful:

...A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech....

However, as Mr. Friedman himself acknowledges, Raising taxes in a recession is a no-no.

And that is how I came to hit upon the idea of tying the gas tax to some economic measure. This will allow the tax to be passed even now, amidst immense economic pain, since the tax will kick in at a very low level at current levels of economic activity. Just like the automatic economic stabilizers are supposed to work, the tax will kick up as economic activity picks up. This will prevent gas junkies from going after their favorite poison (SUV, big block coupes) and abandoning enviro-friendly cars as their budgets become less cramped.

It is true that indexing a tax to some economic measure involves administrative overhead that is not insignificant: updating gas station billing systems all over the country every quarter or even year would require some non-trivial cost and effort. However, the idea of indexing a tax to an economic metric is not exactly unknown - at least one developed nation that I know of (New Zealand) has its personal income tax indexed to inflation. In order to prevent us from falling off the wagon so as to speak, we need to become serious about gas tax now, while ensuring that we don’t cause more hurt to families already squeezed in the current situation. An index gas tax can help.