Former GM Vice Chairman: ‘I Would Raise the Fuel Tax 25 Cents a Gallon per Year’

April 17, 2012 - 2:41 PM

Earns General Motors

FILE - In this Aug. 30, 2011 file photo a 2011 Chevrolet Cruze is featured at a car dealership in San Jose, Calif. General Motors Co. said Thursday, Feb. 16, 2012, it made more money in 2011 than any year in its history. (AP Photo/Paul Sakuma)

(CNSNews.com) - Former Vice Chairman of General Motors Bob Lutz said he would raise taxes on gasoline to compel American consumers to buy more electric cars.

“If I were emperor of the United States, I would raise the fuel tax in the United States by 25 cents a gallon per year,” said Lutz during a panel discussion on energy independence co-sponsored by the Hudson Institute.

“So that people making a purchase decision, ‘Wow it’s 4 dollars this year, $4.25 next year, $4.50 the year after that, you know what? We better buy a compact this time.’”

Lutz claimed an annual tax hike on fuel would create predictability in the auto market and consumers would be more inclined to buy electric cars.

He also called the 18 cents per gallon federal tax on fuel, “ridiculous,” because 18 cents a gallon is in his view too low, and lamented the political risk in the U.S. of advocating for higher taxes on fuel.

“In the states, the political process is such that we can’t use the market mechanism of fuel price to drive demand for these alternative fuel vehicles. So we leave taxation where it is, and then we have to find a somewhat artificial means to incent customers to look at these [electric] vehicles,” he said.

According to Lutz, U.S. electric car production would not require subsidies if elected officials simply raise taxes on fuel—similar to what is done in European countries. He cited the high amount of electric cars bought in Europe as a result of high gas prices.

Lutz said he doesn’t like alternative fuel subsidies “any better than anybody else” but maintained they are necessary if elected officials continue to reject tax increases on fuel as a way to motivate more people to drive electric cars.

“It’s a roundabout way of getting at it, and it isn’t totally free market, but it’ll have to suffice, because we’re not using the free market mechanism to get people to voluntarily restrict their use of gasoline. So we have to come in with an artificial substitute called a subsidy,” he said.

Robert Lutz is former vice chairman of General Motors and has served in various capacities with Ford, BMW and Chrysler Corporation. Currently, he is a part time adviser at General Motors after being a senior adviser from April 2009-May 2010.

During 2009-2010, General Motors received $49.5 billion out of the approximately $100 billion in taxpayer funds that were given to the auto industry under the Troubled Asset Relief Program, otherwise known as TARP.

Last year, GM recorded its highest profit ever during the company’s 103-year history.