Higher Taxes = Lower Gas Prices?

September 9, 2005

Laissez-faire has officially been removed from the French dictionary.

Believe it or not, as a means of trying to lower the price at the pump for its citizens, French Finance Minister Thierry Breton has proposed a special tax on oil companies. That’s right…his idea is to lower the price at the pump by raising taxes on gasoline producers. From Yahoo News:

PARIS – French Finance Minister Thierry Breton said Thursday he was considering asking oil companies to lower their prices at the pump and imposing a “special tax” on them to ease the burden of surging prices on consumers.

Breton told France-2 television that he wanted to find ways to return to consumers the extra costs they have shelled out through rising prices in gasoline.

He said the government planned to gather oil industry leaders and ask them to come up with concrete proposals on how to ease the problem.

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What they appear not to understand in Paris is that the government taking of profits from oil companies and giving it to buyers will discourage supply over time, while at the same time, encourage more gasoline consumption. Thus, we have made the problem even worse by creating a shortage from de facto price controls.

With policies like this, it’s no wonder the OECD’s 2005 Economic Survey had the following take on the state of the French economy: “Although a modest economic upturn seems to be established, low growth and, especially, high unemployment characterise recent economic performance.”

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