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Look to gas tax to prod fuel efficiency


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POSTED: Thursday, May 21, 2009

A state tax exemption on the sale of gasoline in Hawaii will expire on June 30, adding nearly a dime a gallon to the price come July 1.

Tax increases will likely have to go far beyond that and be made nationwide before Americans will trade in their gas guzzlers for more fuel-efficient cars, which is the goal of a new mileage standard. At some point, Congress should address the question of whether substantial federal gas tax increases will be needed to create the needed market for hybrids and electric cars.

Since 1980, Hawaii has exempted from the general excise tax the sale of ethanol-blended gasoline, which now includes all gasoline sold in the state. The exemption amounts to 9.6 cents a gallon. Honolulu motorists now pay 17 cents a gallon in gasoline taxes and 16.5 cents in county taxes, in addition to the federal tax of 18.4 cents.

The Lingle administration supported reinstating the tax, which will mean $40 million a year in state tax revenue. Kurt Kawafuchi, the state director of taxation, noted in testimony to legislators in February that oil prices had dropped to near record lows so that both prices at the pump and demand had “;plummeted to the benefit of drivers.”; Indeed, oil prices dropped from a high of $147 a barrel last July to below $35 in March but have increased since then to more than $60.

The Obama administration announced Tuesday that auto manufacturers would be required to produce fleets by 2016 that are 40 percent cleaner and more fuel-efficient, with a national standard of 35.5 miles per gallon, up from today's 27.5 miles per gallon. Stunned last summer when gasoline prices rose to $4.50 a gallon, auto executives agreed with environmentalists that such a goal was needed to reduce the dependence on foreign oil.

Since then, gas prices have dropped to $2.55 a gallon in Hawaii, with the tax exemption, and around $2.25 across the mainland. Motorists once again are comfortable with their road monsters, and compact cars' share of vehicle purchases has actually dropped since last summer. The administration predicts that the fuel requirements will add $1,300 to the price of a car, while others say it could be twice that.

Americans cringe at the suggestion that the federal gas tax, now 18.4 cents a gallon, should be increased to create such a market, cognizant that taxes of $3 a gallon in Europe have resulted in domination of the market by fuel-efficient cars. Members of Congress shy away from giving any credence to the idea, as does the Obama administration.

Pressed Tuesday by co-host Diane Sawyer on ABC's “;Good Morning America”; if an increase in federal gas taxes would be needed to create the desired market, Carol Browner, Obama's assistant for energy and climate change, refused to go beyond saying that the administration works “;within the laws on the books.”; Refusal to recognize the realities of the market could doom the ambitious energy goals of the administration.