Friday, December 5, 2008

Things you can do in authoritarian China that you can't do here

China plans next month to raise tax on regular gasoline by five fold and diesel fuel tax by eight fold, in a move to take advantage of falling crude prices and encourage energy conservation, state-run media reported Friday.


Government officials see the dramatic fall in global crude oil prices -- currently around $43 a barrel, down from a high of about $147 in July -- as "a perfect opportunity" for the increase, the report said.

Read the rest here. Of course, it's a pretty bad time to be raising taxes, but in the long run this is good policy. China and India and many other heavy polluters have been subsidizing gas consumption, not taxing it. You could probably make the argument that we in the US have also been subsidizing gas consumption on balance, when you take into account the highway subsidies.

But is there any country currently proposing to lower taxes, gas or otherwise, in this likely deflationary environment? Has any country ever tried lowering taxes in a deflationary environment? Is there any reason why? I see only two, niether of which make me optimistic about the future:
1) We have only the experience of the Depression, and only the Keynesian reaction, so we are too afraid or stupid to try anything else.
2) With voters paralyzed in fear/stupidity, the most successful politicians, i.e. the most venal, will sieze this "perfect opportunity" to expand their power.

Merry Christmas and to all a good night!

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