Tax energy use, not employment

"Are You Smarter than a 5th Grader?" is the newest and hottest FOX television game show, and it's making a lot of us feel positively dumb.

Most of the questions on the show, however, amount to little more than trivia. Unless you are an artist, who cares what color you get when you mix red and blue?

But let's try a couple of fifth-grade level questions that really matter. For starters, should people be encouraged to work? Whew, that's an easy one. Of course.

OK, how about this one? Should the US reduce its dependence on oil? Another easy one. Everyone this side of fifth grade knows that the US is consuming too much oil.

Great. Let's try a question that's only slightly more difficult to answer. Does the federal government get more money from gasoline taxes than it does from payroll taxes? The answer is no. Not even close. The federal gasoline tax brings in about $20 billion a year in revenues. Federal payroll taxes alone bring in more than $800 billion a year.

And now for a trickier question: If people should be encouraged to work and gasoline consumption should be discouraged, why do we tax work so heavily and gasoline consumption so lightly? By now, you may be scratching your head and saying, "Yeah, why is that?"

There is no simple answer to this question. Some might say that many Americans need their cars and can't afford to pay more for gasoline. This is a valid point, but people need to work, too, and that doesn't stop Congress from taxing paychecks heftily.

In truth, taxation can be arbitrary. Many economists agree that it makes sense to tax gasoline (a "bad") more heavily than employment (a "good"). And there are several reasons why the US government should act on this good sense.

Americans' gasoline consumption is holding the United States hostage to potentially hostile governments such as Iran and Venezuela. Consumption of fossil fuels – particularly oil and coal – also pollutes water, land, and air and contributes to global warming.

The US spends billions of dollars every year to ensure that terrorists don't interrupt the flow of oil. If higher energy taxes will help Americans reduce their dependence on fossil fuels, then by all means the government should implement them.

On the other hand, Americans work hard at their jobs, and they should be amply compensated for the time and effort they put in. Workers should be allowed to keep as much as possible of their income – after all, they earned it.

Of course driving is a daily essential for some people, but these folks will be better able to afford higher gas prices if they can take home a higher percentage of their wages.

An increasing number of liberals, such as Al Gore, and conservatives, such as Texas oil billionaire T. Boone Pickens, are publicly supporting the idea of taxing energy more and work less.

Mr. Gore, in fact, has proposed that pollution taxes and carbon taxes on oil and coal be used to eliminate the payroll taxes that are now used to finance Social Security, Medicare, and unemployment insurance.

Mr. Pickens proposes that the US hike gasoline taxes enough to raise the price of gasoline to five dollars a gallon and use the revenues to cut the payroll taxes paid by employees and employers.

All across Europe – where energy taxes are already much higher than in the US – governments are already cutting payroll taxes. Why? Because they want to boost employment.

By cutting payroll tax rates, European leaders are encouraging more people to work and making their workers more competitive in the global marketplace.

If the US wants to reduce the outsourcing of jobs to overseas workers, then Congress should be following Europe's lead. Payroll taxes increase the costs of hiring US workers.

So why shouldn't the US be taxing earnings less and taxing our consumption of energy more?

Good question. Let's see whether Congress is smarter than a fifth-grader.

• Robert Walker is president of Get America Working!, a bipartisan organization in Arlington, Va., that strives to create jobs through structural changes in the US economy.