Sales of Priuses are down too

[Puppycow]

My ipod told me this morning that sales of priuses are down almost 50%, so it's not just the "Detroit three" or gas guzzlers that are affected. Toyota and Honda's overall sales are down about 30%. Toyota had to slash its profit forecast for the year.

Link

The company forecasts net income of 550 billion yen ($5.7 billion) for the year ending March 31, compared with an earlier prediction of 1.25 trillion yen, Toyota said Nov. 7. The new forecast will be a 68 percent drop from the 1.72 trillion yen Toyota earned last year. Toyota cut its operating profit goal 63 percent to 600 billion yen.

Honda too

Honda expects operating profit of 550 billion yen for the 12 months ending March, the lowest in eight years.

Supposedly the "plan" Congress wants from the Detroit three would have them start building more hybrids and electrics, fewer SUVs and other gas guzzlers, but the fact that Prius sales are plunging now suggest that this might not be a panacea.

Wouldn't this be a good time for a gas tax? The price of oil is yoyoing like crazy. How can the automakers know what kind of cars to produce if they don't know whether oil will be $25/barrel or $125/barrel next year? A gas tax would take away some of that uncertainty, encourage efficiency and provide a revenue source that could offset the bailout of automakers.

 

[qwints]

Why would a gas tax stabilize prices? Wouldn't it just be tacked on top of volatile prices?

 

[SezMe]

Why would a gas tax stabilize prices? Wouldn't it just be tacked on top of volatile prices?

The idea would be to create a gas tax that would stabilize the pump price at, say, $5 per gallon (just an arbitrary figure for the sake of the discussion). Whatever the "market price" the actual pump price would be $5. At this level (or whatever it is) the automakers could plan for a healthy market for low mileage vehicles and the government could use the revenues for various purposes to further enhance the viability of low mileage vehicles.

 

[timhau]

My ipod told me this morning that sales of priuses are down almost 50%, so it's not just the "Detroit three" or gas guzzlers that are affected. Toyota and Honda's overall sales are down about 30%. Toyota had to slash its profit forecast for the year.

Sure, they are affected, but note that while they cut their profit estimates, they still remain profit estimates.

 

[Puppycow]

The idea would be to create a gas tax that would stabilize the pump price at, say, $5 per gallon (just an arbitrary figure for the sake of the discussion). Whatever the "market price" the actual pump price would be $5. At this level (or whatever it is) the automakers could plan for a healthy market for low mileage vehicles and the government could use the revenues for various purposes to further enhance the viability of low mileage vehicles.

Wouldn't gas stations just raise the price to exactly $5 to zero out the tax and maximize profits?

Why would a gas tax stabilize prices? Wouldn't it just be tacked on top of volatile prices?

I wonder if they could design a tax that would reduce the volatility somewhat, but which could not be gamed by gas stations as I described above. Say, one that resets each month based on average prices for the previous month, but is fixed until the end of the month.

 

[Puppycow]

Sure, they are affected, but note that while they cut their profit estimates, they still remain profit estimates.

Yep. Key difference.

 

[Bob Blaylock]

It seems to me that a good working definition of a “Liberal” in American politics would be someone like the OP, who thinks that a new tax is a good way to solve a problem.

 

[Puppycow]

And an equally good working definition of a "conservative" is someone who is ideologically opposed to all taxes. With taxes, we buy civilization.

 

[SezMe]

Wouldn't gas stations just raise the price to exactly $5 to zero out the tax and maximize profits?

Two points. First, I know of no gas station that independently sets its prices.

Secondly, under my hypothetical tax policy could also include some sort of "excess profits tax" that would defeat such a practice.

I would emphasize that I am NOT advocating such a tax policy, I am just positing alternative tax policies.

 

[Darat]

In the UK we already have a huge "fuel tax" (I think at the moment accounting for something like 80+% of the cost of fuel at the pump) and the government has put off intended rises in the duty to try and offset the recent high fuel prices. But this has amounted to a few pence at the pump and petrol in the UK rose by about 30p litre in a matter of months so any buffering was swamped by the fluctuation in the price of oil.

I don't think you could introduce a system via taxation that would help stabilise the fuel price if the underlying price of oil remains so volatile. For a start once the government gets used to the revenue from the fuel tax it will be hard for them to "give it up" to keep the price down for consumers and secondly it would require a very large hike from the current price to be able to create a buffer that could cover the recent price changes. That is something that I would say would be politically impossible to impose any time over the next few years (at least).

 

[Francesca R]

Wouldn't this be a good time for a gas tax? The price of oil is yoyoing like crazy. How can the automakers know what kind of cars to produce if they don't know whether oil will be $25/barrel or $125/barrel next year? A gas tax would take away some of that uncertainty, encourage efficiency and provide a revenue source that could offset the bailout of automakers.

A petrol tax would need to be highly variable so that it would absorb excess revenue for the government when the oil price was low and would cost the government when it was high. Several countries, notably oil rich gulf states and Brazil (I think) but also several net oil importers in Asia, such as India, have been subsidising petrol for quite a while. Oil producing governments can do this quite sustainably. Importers can't. The cost to India's public debt from subsidy of petrol has been quite severe--it would not be feasible if car ownership was substantially higher, as it certainly will be in the future.

In general there is merit in some kind of automatic fiscal stabiliser like this from the perspective of public society, but the merit and fairness of it falls the less one views driving as a "necessity" like food and shelter. IMO it ranks below the importance of a basic level if social security insurance, so countries in which that is scant would do better to use taxpayer resources that way.

I am not persuaded that it is valid to stabilise petrol in order to reduce the inherent risks to the auto industry. In that case, it is protectionism by another name. The oil price is the oil price and it is very volatile. The reasons for that I have given my view about elsewhere on this forum. Supposed "cartels" like OPEC have no control over it. Individual governments attempting to compensate private business for it is a losing strategy and a poor use of public money.

 

[Just thinking]

I don't think you could introduce a system via taxation that would help stabilise the fuel price if the underlying price of oil remains so volatile. For a start once the government gets used to the revenue from the fuel tax it will be hard for them to "give it up" to keep the price down for consumers and secondly it would require a very large hike from the current price to be able to create a buffer that could cover the recent price changes. That is something that I would say would be politically impossible to impose any time over the next few years (at least).

Quite true ... look at other "sin" or sales taxes as examples. Besides, any additional taxes at this time would be political suicide. In my home state Governor Corzine just signed a bill that increased the major roadway tolls; we'll see how he does come re-election. On the NJ Parkway the increase (for cars) was almost 43%. And the unemployment numbers just released are up again. Right now the only silver lining in all this mess is a relief in some energy costs. People are hurting ... having the hurt increase is not the answer.

 

[qwints]

What could is increased use of the Strategic Petroleum Reserve to moderate prices. The real use of a gas tax (ignoring the revenue-raising implications) is to factor in externalities of using gas/gas-powered things into the cost of buying them. Things like pollution, traffic and road wear are a 'cost' of driving that drivers don't pay without a tax.

 

[WildCat]

Two points. First, I know of no gas station that independently sets its prices.

Say what?

 

[SezMe]

Say what?

Go ask the manager of your favorite gas station if he sets his own pump prices.

 

[Twiler]

It seems to me that a good working definition of a “Liberal” in American politics would be someone like the OP, who thinks that a new tax is a good way to solve a problem.

Is not the REAL definition of a liberal one who seeks to increase individual liberties? How does that square with someone who wants to take money from people and put it in the hands of the government?

 

[Francesca R]

Is not the REAL definition of a liberal one who seeks to increase individual liberties? How does that square with someone who wants to take money from people and put it in the hands of the government?

In general? Because some liberties are secured by government provision, which is often only viable if society collectively coerces itself to pay for it.

But not exactly the topic of this thread.

 

[Bob Blaylock]

Is not the REAL definition of a liberal one who seeks to increase individual liberties? How does that square with someone who wants to take money from people and put it in the hands of the government?

In a more broad definition, yes. In American politics, however, the word “Liberal” is generally associated with the point of view that seeks to make government bigger and more burdensome, at the expense of freedom.* American liberalism seems to be based on the idea that it is up to government to solve all our problems; which, of course, calls for more government regulation, more assorted government programs, and, of course, more taxes to pay for it all.

What really struck me about the OP was that he proposed a new tax itself as a “solution” to a perceived problem. He wasn't talking about some new government program, and then a new tax to pay for it; he was promoting the idea of the tax itself as the solution, with any consideration to how the tax revenues would be spent being a distance secondary consideration. Beyond anything that is normally found among American liberals, this seems to be almost intended as a mocking caricature of American liberalism. I'd like to believe that that is how it was intended, but alas, I fear the OP really believes that a tax can, in itself, be a solution to a problem, as he has proposed. I think that even most mainstream “liberals” would not put forward such a position.

 

[Bob Blaylock]

Besides, any additional taxes at this time would be political suicide. In my home state Governor Corzine just signed a bill that increased the major roadway tolls; we'll see how he does come re-election. On the NJ Parkway the increase (for cars) was almost 43%. And the unemployment numbers just released are up again. Right now the only silver lining in all this mess is a relief in some energy costs. People are hurting ... having the hurt increase is not the answer.

Perhaps another silver lining may be that you'll have a new governor after the next election.

 

[drkitten]

In a more broad definition, yes. In American politics, however, the word “Liberal” is generally associated with the point of view that seeks to make government bigger and more burdensome, at the expense of freedom.

Generally associated in the minds of people who believe and spread right-wing lies, yes.