Gas Prices

[Giller]

Originally Posted by Perfectlap

The Canadian consumer's mindset is entirely different to the American. When gas goes near $4 American wallets and pocketbooks stay closed. Since the financial crisis in 2009 we saw it replay time and time again. The economy would start to build some momentum and fuel costs rising would douse a cold bucket right onto the consumer, quickly. Americans have a great sensitivity to pricey fill ups. It affects all the spending that comes after driving off from the gas station. Gas prices were anchored into a very low range for an eternity before the rise of emerging markets created an expectation of greater demand. We got used to low fuel prices and when in a very short time gas jumped 30-40% it sent shivers down all our spines. Stagnant wages for over a decade means we simply don't handle abrupt changes, for the worse, in personal finance well. Taxes on gas works in continents that are used to high taxes, this isn't one them.

You can make a compelling case for greater investment on infrastructure, but opting to raise revenue from a consumer-sore spot is counterproductive. A flat national sales tax, closing corporate tax loopholes, maybe even the Buffett Rule, would all contribute towards that infrastructure without cooling consumer spending. And consumer spending is the make or break in lifting GDP.

Bearing all that in mind - the price of gas as of a few months ago was extremely high - and in 2013 was about $3.50/gallon, slightly down from 2012. In all that, the US economy continued to grow and become dominate again in the world. So in the past few years, the price of gas has gone way up - but so has the US economy. A small increase to gas taxes would still keep the price under this magical $4, but also, the recent evidence shows that gas prices are not affecting consumer spending...at least not anymore.