That Gasoline Tax

This file is a short, single-authored polemical economic essay by Murray N. Rothbard. Its narrow scope is the early-1990s revival of proposals for a federal gasoline-tax increase, but Rothbard uses that proposal to stage a broader libertarian argument about prices, coercion, fiscal politics, environmental rhetoric, and the cultural meaning of the automobile.

The big bad gasoline tax, one of the favorite programs of left-liberalism, is back in the limelight.

Rothbard begins from the Clinton transition “economic summit,” mocked as ideologically homogeneous. The gas tax is framed not as neutral technical policy but as an elite interventionist consensus. The essay then proceeds by dismantling successive rationales. First comes conservation. Rothbard grants that a tax would reduce gasoline purchases, but denies that forced reduction is inherently desirable.

But why is this dictatorial coercion, this forcing a lower standard of living upon American consumers, supposed to be a good thing in a free society?

His central conceptual move is to relocate “conservation” from government policy to the price system. Scarcity, expected future supply, present demand, and production incentives are, for him, already coordinated through market prices. If oil becomes scarcer, prices rise, consumers economize, and producers seek greater supply or productivity. A tax merely overlays political force onto that process.

The market economy is continually being forced to choose: how much of product X or product Y, of resource X or Y, should be produced now, and how much should be "conserved" to be produced in the future?

From this premise, the gasoline tax is not a corrective but a distortion: government lacks the information carried by market prices, will overcorrect, and, unlike a producer price increase, will not stimulate additional supply. Rothbard reinforces the point by citing the fall in the real price of gasoline, which he treats as evidence of abundance rather than crisis.

The second target is “fuel efficiency.” Rothbard recasts it as arbitrary single-factor planning. Automobiles do not exist only to economize fuel; they also embody tradeoffs involving time, safety, labor, tires, comfort, and mobility. Political optimization of one dimension damages others.

The market coordinates all these efficiencies in the most optimal way for the consumer.

Rothbard then rejects “foreign oil” arguments, contending that a gas tax suppresses domestic as well as imported oil use and that international exchange should not be treated as dependence.

And besides, what’s wrong with free trade and the international division of labor?

The comparison with higher European gasoline taxes is dismissed as an imitation fallacy rather than a serious policy benchmark.

Maybe we can find lots of countries with a higher TB rate. Are we supposed to rush to emulate them too?

He acknowledges two objections even mainstream media notice: the burden on rural and Western drivers, and the regressive effect on the middle class. But he argues that compensatory responses—earmarking revenue for highways or offering other benefits—undercut the alleged deficit-reduction purpose. The fiscal argument is therefore, for him, a pretext.

It is strange that liberals only worry about the deficit when they can use it as an excuse to raise taxes.

The closing section shifts from economics to ideological diagnosis. Rothbard argues that liberals favor taxation because it transfers resources from producers to government and advances socialism. The gasoline tax has special appeal, he claims, because it targets the automobile as an emblem of private mobility and middle-class independence.

Because, of all the features of modern American life, liberals have special hatred for the automobile.

Against mass transit, associated here with collectivism and fixed schedules, Rothbard casts the car as individualized freedom of movement.

In contrast to mass transport, which liberals find satisfyingly collective, egalitarian, and rigidly fixed to time and place schedules, the automobile is gloriously individualistic.

The essay’s relevance lies in how compactly it combines Rothbard’s Austrian price theory, anti-tax public finance, free-trade commitments, anti-environmentalist skepticism, and cultural defense of bourgeois consumption. Its thesis is not simply that a gasoline tax is inefficient, but that it misconstrues scarcity, centralizes economic judgment, disguises taxation as conservation, and attacks a form of mobility Rothbard regards as emblematic of a free society.