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The Gas Tax Debate

Posted by: Annika Darling @ June 16, 2014, 1:28 p.m.

Arguments supporting the federal gas increase are more or less unpersuasive.  They fail to convince because they are extremely unlikely to improve the current condition of the economy, road conditions, roadway congestion, or tailpipe emissions. The federal tax increase should be viewed as a second-, third-, even fourth-best-remedy to these problems, and such offending externalities would be best remedied through direct change.

It's Mathematically Unsound

Increasing the federal gas has been designated high risk for several reasons. To begin with one of the main reasons for the need to increase the gas tax is due to people buying more fuel efficient and alternative fuel type vehicles. Thus: buying less gas, and paying less tax. This is a trend that promises to continue, and, hopefully, grow. Increasing a tax on a decreasing number of people is mathematically unsound. In an uncreative way, one can certainly see this as a solution – however, it is undeniably temporary; it is a quick-fix at best.

There are many problems with a federal gas tax that don’t take into consideration the greatly our-of-proportion taxes that automobiles are currently paying in comparison to larger trucks. The tax increase would also be a blanketed tax increase which ignores the differences in state taxes, where certain states (Nebraska, Main, North Carolina, etc.) state gas taxes that increase with inflation as it is, and this would continue to add to the disproportionate charges of these states.

Localize it!

The only circumstances that gasoline tax makes sense is on a very localized level and should only, even then, be a fraction of current charges on motorists; and solely enforced in circumstances where those transaction costs associated with road use charges are so high that gasoline taxes are the only reasonable way to pay for road construction and maintenance.

Current voters, if history tells us anything, do not make sacrifices for future generations. Just one glance at America’s lavish commitments to retirees in the form of Social Security should convince anyone of this notion. Sadly, voters are happy to rob future generations. This is what increasing the gas tax perpetuates.

While it seems like the easiest solution, and most likely is the easiest to pass through the political arena, it should not be considered as the first option. Since 2000, at least a half a dozen attempts have been made by individual members of Congress to suspend the federal gas tax. All have failed.   

Right Idea Wrong Target

In a nutshell, the federal gas tax…taxes the wrong thing! If our aim is to tax pollution, we should tax the emission of pollutants, not the raw consumption of gas. The two are not identical. For example: 5 percent of the vehicles on the road today generate 53 percent of volatile organic compound (VOC) emissions, while another 10 percent of the vehicles on the road today generate 76 percent of the same.

Volatile organic compound (VOC) emissions are a huge contributing factor to urban smog. Vehicles that emit the highest levels of VOCs are the most likely to emit high loads of other pollutants. Emissions are what need to be regulated, not gas consumption. Seen in this light, a uniform gas tax will over tax some drivers and under tax others.

Consumers for many reasons are purchasing more fuel efficient vehicles, and will continue to do so in response to an increasing fuel tax. Over the long run we will see more efficient cars, not less driving. Better approaches would then include tolls that vary with congestion the promotion of “Pay-As-You-Drive” insurance – under which premiums would vary in direct proportion to vehicle miles traveled and the insured’s risk factor as determined by the insurance company.

Taxing a vehicle for miles traveled is beneficial because it is more inelastic than a blanketed gas tax. It is not costly at all to monitor a vehicle for miles traveled. In fact, it is quite simple.

Good Talk, Guys!

A sustainable solution to funding surface transportation is based on balancing revenues to and spending from the Highway Trust Fund. New revenues from users can come only from taxes and fees, and ultimately major changes in transportation spending, revenues, or both will be needed to bring the two into balance.

While this may be the right conversation to have, we’re just not convinced that the answer is more gasoline taxes.

We may not live in an ideal world, but we can’t let that keep us from trying.

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