Read it and weep future billionaires of america

[kentonio]

Right. They'll raise prices by a couple of cents per pound.

Except many goods are sold on the basis of the cost per item, not on the cost of loose weight. Yes, with many items you could see companies reducing the size of goods, but in reality it's often much simpler for them to raise prices by a cent or two than to start resizing and selling a 494g jar of coffee instead of a 500g jar.

[Kuciwalker]

Yes, if you raised shipping costs by 1 cent per pound, and that was the only change in prices that ever happened ever until the end of time, that might show up as a price increase of more than 1 cent per pound for some good (and possibly no price increase at all for other goods!). However, given that the price of gasoline itself is constantly fluctuating (let alone all the other inputs), we can be very confident in calling the expected average price increase as 1-2 cents per pound.

This argument is ridiculous, kentonio. There is no actual need to keep defending this point; no one is going to think you are stupid for giving it up and no one is going to think you are clever for sticking to your guns.

[kentonio]

Sorry but I'm not arguing this because of any fear of wanting to lose/look bad or whatever, I'm continuing to argue because I literally have no idea how you can both think that you could put a substantial tax rise on fuel without substantially raising goods prices. I understand the arguments you're both making, but I genuinely do not believe they hold true in the real world. Fuel taxing is a pretty big issue over here where the tax on petrol makes up around 60% of the cost.

[Jaguar]

Because a cent per pound of food is maybe $10 a year per person? It's a rounding error even on the food budget of a Kenyan farmer, much less an American food stamps recipient.

[Kuciwalker]

Sorry but I'm not arguing this because of any fear of wanting to lose/look bad or whatever, I'm continuing to argue because I literally have no idea how you can both think that you could put a substantial tax rise on fuel without substantially raising goods prices.

Because fuel is a comparatively small component of final retail prices for goods, so an increase in fuel prices has a small effect on final retail prices. This is also why you don't see store prices fluctuate wildly when gas prices go up (or down), as they do frequently.

[snoopy369]

You're also ignoring that a lot of these prices are not going to go up the full 1-2 cents per pound - supply cost is only one element in determining the market price of a good. It might well stay the same price. Particularly in your silly 'per unit price' argument - sure, some things will go up a bit more than .01/pound since they can't easily go up that amount; but some will stay the same.

[Aeson]

i.e. we can still do the "add up the total weight of the food someone buys in a year" and get a solid order-of-magnitude estimate of how much the gas tax would cost that person in increased food prices.

Not using the reasoning so far displayed in this thread. kentonio is right that a fuel tax that doesn't differentiate between use would increase the cost of food significantly (relative to the amount of the tax increase), just wrong about why. You and Jag are right that fuel taxes would be a good thing ...

As is clear enough already, transportation is not that big of a cost in regards to the final cost of food of course. (Snoopy and I addressed this in a round-about way in the local food thread too.)

The real elephant in the room is that fuel inputs into food production are a significant portion of the cost. This is especially true for staples, which are largely chosen because of the crops' suitability for replacing labor with fuel.

A price increase of 10%-20% on food wouldn't be out of the question if we doubled the price of fuel inputs. That is what I would see in costs in my own farming experience. It may even be more significant than that. (I'm not terribly familiar with the more fully automated farming costs that we have with corn, wheat, potatoes, ect. They definitely use a higher ratio of fuel:labor than we do here, but also are more efficient about how much work they do with a given amount of fuel.)

Fertilizer costs may go down a bit due to less competition for oil. They might go up. (A badly implemented tax could target their petroleum inputs over and above fuel. That would definitely be the wrong thing to do.)

----------------

Of course this is not to say the effects of a tax increase on fuel wouldn't be good still. We certainly should phase them in, but I would wait until the economy is doing better before starting. The positive effects (in addition to those mentioned) would be to push more food production away from unhealthy diets that most of our choice of staples contribute to, and creating jobs worldwide. (I wouldn't expect it to really help with unemployment in the US, as even if it's a relatively nice greenhouse job, most white collar workers aren't going to apply for farm labor. It may put pressure on immigration restrictions though.)

[Jaguar]

A good point.

[Aeson]

I didn't really go into much depth as to why it would create jobs worldwide.

First would be by incentives to labor over fuel use (relative to what it is currently).

Second could be by decreasing the cost efficiency of staples in the US (which we are extremly good at producing, and export a lot of) the competition in other countries (which already pay higher gas prices) would allow more of the sub-marginal farmers to make a profit. Much of this profit will go right back in as demand for more food. These are after-all, the people who can't afford to feed their families as well as they would like.

I don't think this would happen though. At least not to the full potential of the effects. We'd probably end up modifying subsidies to try to maintain equilibrium. (I think corn subsidies scale to keep the price of corn stable. Not sure on other staples. Cherries has something like this too, only in limiting production. Probably a lot of crops do one or the other. The US "free market" approach to agriculture )

[Dauphin]

Sorry but I'm not arguing this because of any fear of wanting to lose/look bad or whatever, I'm continuing to argue because I literally have no idea how you can both think that you could put a substantial tax rise on fuel without substantially raising goods prices. I understand the arguments you're both making, but I genuinely do not believe they hold true in the real world. Fuel taxing is a pretty big issue over here where the tax on petrol makes up around 60% of the cost.

Fuel tax protests in the UK are not economic per se, they are political. The cost of fuel has tripled in the last twenty years*, as has fuel duty (the cost of petrol has gone up a bit more than fuel duty in percentage terms, but not much). General inflation means the price of goods have generally doubled.

An argument that is often banded around is that haulage companies are going out of business because they can't afford the petrol and diesel because the fuel duty is too high. Why aren't they raising their prices and passing it on to consumers? The answer given is that European competitors aren't paying as much for their fuel. So the complaint is politically manifest - they want the government to stop foreigners having an unfair advantage. Joe Public gets on board because, well, who wouldn't want cheaper petrol, right?

*Unleaded petrol duty in 1990 was 20 pence a litre, total cost was 47 pence a litre (or thereabouts). In 2011 the tax was 58 pence per litre, and the total cost of petrol is about £1.40 (or thereabouts).

[kentonio]

Fuel tax protests in the UK are not economic per se, they are political.

Who said anything about the protests? I'm discussing this because I have family who own a small transport business so this stuff is rather personal to me.

An argument that is often banded around is that haulage companies are going out of business because they can't afford the petrol and diesel because the fuel duty is too high. Why aren't they raising their prices and passing it on to consumers?

No it isn't political, when transport companies raise their costs the amount of business they get falls. People cut down on the number of deliveries they send, they hold stuff back unless it's absolutely necessary etc etc. It has a very real impact on businesses.

[Dauphin]

Who said anything about the protests?

"Pretty big issue" and mention of 60% tax rates is quite clearly linked to fuel tax protests by hauliers. You didn't mention protests, but protests are an expression of the issue are they not?

I'm discussing this because I have family who own a small transport business so this stuff is rather personal to me.

So you're discussing it from the point of a vested interest. OK.

No it isn't political, when transport companies raise their costs the amount of business they get falls. People cut down on the number of deliveries they send, they hold stuff back unless it's absolutely necessary etc etc. It has a very real impact on businesses.

You mean they make a choice about what they consider essential?

[kentonio]

"Pretty big issue" and mention of 60% tax rates is quite clearly linked to fuel tax protests by hauliers. You didn't mention protests, but protests are an expression of the issue are they not?

They are a fair issue to raise, just not what I was talking about previously.

So you're discussing it from the point of a vested interest. OK.

Yes I have a vested interest in small transport businesses being healthy.

You mean they make a choice about what they consider essential?

They move less goods, which in turn hurts haulage businesses. You could argue that cutting down haulage and thus emissions is a good thing, but that also has an impact on the health of the companies who use haulage, not just the haulage firms themselves.

[Dauphin]

How much does a haulier pay for petrol, compared to Joe Public?

[kentonio]

For a small firm? Exactly the same as everyone else, but then they get to claim the VAT back.