After the Gas Tax
Pat Garofalo writes about a second straight year of shortfalls in the Highway Trust Fund driven by reduced fuel consumption and therefore lower gasoline taxes:
In any case, in light of new CAFE standards and a growing emphasis on fuel efficient vehicles, raising the gas tax is not a permanent fix for the fund’s woes. Two congressionally mandated commissions have recommended that “Congress find a new revenue source to pay for highway and transit programs,” and “their top recommendation was to tax motorists based on how many miles they drive.”
I think it’s probably true that in the long run there’s a need to move beyond the gas tax as the main source of transportation funding, but for the short term it seems that the obvious policy solution would be (run and hide!) a higher gasoline tax. Taxes on gasoline are an eminently logical source of revenue. Gasoline consumption is associated with a lot of negative externalities. A so-called VMT—Vehicle Miles Traveled—charge doesn’t align incentives nearly as well. Now that said, an idea related to a VMT, congestion charges, could also raise a lot of funds in some areas.
But to me it all keeps coming down to the fact that driving, as such, is perfectly fine. Given that we have all these roads, people may as well drive on them. But burning gasoline creates a lot of solution. And driving on crowded roads at crowded times creates a lot of problems. Those are the things we should be charging for. And if the current gas tax rate doesn’t bring in enough revenue, we should raise the rate.
34 Responses to “After the Gas Tax”
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June 3rd, 2009 at 9:24 am
But burning gasoline creates a lot of solution.
Apart from this strange, Confucian typo that reads like a badly translated press release from a Malaysian oil company, I agree with Matt.
June 3rd, 2009 at 9:30 am
It creates the solution where the ignition gasoline is many but.
June 3rd, 2009 at 9:31 am
Of course, all sensible people agree with Matt on this issue. I would like to hear a little about the political dimension, though. First, timing: should we wait until we are out of the recession? Second, what are the chances it would pass, and how bad would the political blowback be?
The Republicans are absolutely crushed right now. Do we want to give them an easy populist issue to give them momentum, even though we are right on the merits?
June 3rd, 2009 at 9:31 am
Why not just raise the gas tax?
Unlike the VMT tax, that will encourage people to buy fuel-efficient cars, which will help our new car company. It will also reduce emissions more than the VMT tax, which is the goal–the goal is NOT to build more roads.
The gas tax is morally superior, in so far as it’s more punitive for people driving gas guzzlers. Finally, raising the gas tax is more politically sound–with cover from Voinovich–than adding a brand new “I know where you are” device to every car.
Seriously, the VMT tax is one of the worst ideas I’ve ever heard, given that it’s the replacement for a tax that’s better in almost every way.
June 3rd, 2009 at 9:39 am
the VMT tax is one of the worst ideas I’ve ever heard
I agree. Which is why it should be pushed out in front, a bill implementing it should be drafted, and then, ultimately, we should “compromise” on a higher gas tax.
June 3rd, 2009 at 9:42 am
Yes, but this confuses the two issues. Funding the highways and controlling for externalities are not (necessarily) the same problem. There is, in any case, no reason why we couldn’t raise the gas tax slightly and also impose a minor VMT.
June 3rd, 2009 at 9:57 am
But to me it all keeps coming down to the fact that driving, as such, is perfectly fine. Given that we have all these roads, people may as well drive on them.
It may be fine, but it isn’t costless.
In other words, I basically agree with Matt’s externality analysis, but every once in a while it is worth remembering the internalities as well as the externalities. In this case, the revenues from the federal gas tax are going in large part to expanding and maintaining a road system, and the more you drive generally the more benefit you get from the expansion of the system and the more costs you impose in the form of necessary maintenance.
Now of course at least as far as the maintenance side is concerned, ideally you would want to include not just miles driven but also the axle load of the vehicle. And this was what was somewhat clever about a gas tax: in a world with one dominant technology for powering two-axle personal vehicles, gas consumption was a fairly good proxy for miles driven times axle load (this breaks down a bit when you get to vehicles with more than two axles, but I will hold that aside).
But we are moving into an era where that technological assumption is no longer going to be true–the amount of gasoline consumed per mile driven times axle load is going to start varying more and more as more and more personal vehicles contain alternative technologies (note this includes everything from mass-produced turbocharged direct-injection gasoline engines tuned for fuel efficiency to high-efficiency modern diesels to hybrids to plug-in hybrids to vehicles which don’t consume crude-oil-based fuels at all). So maintenance costs imposed aren’t going to correlate as well with gasoline consumption, and of course driving more is still going to correlate with benefiting more from an expanded road system.
So I think it is fine to keep around a high gas tax for a while to encourage switching to technologies that create less in the way of negative externalities. But we also still have to pay for building and maintaining roads. So, particularly if our gas tax is actually working, there will be an increasingly strong case for supplementing the gas tax with a tax that correlates better with the benefits received and costs imposed by people driving personal vehicles using those alternate technologies. And some form of VMT tax (preferably one taking axle loads into account) would be a logical supplement.
June 3rd, 2009 at 10:07 am
I like it. we need more regressive taxes, to make up for all the people that don’t pay income tax.
June 3rd, 2009 at 10:14 am
A quote from a English-language (sort of) tour guide for a Japanese park: “This road is up the only.”
June 3rd, 2009 at 10:46 am
Other than that regressive tax thing, I keep waiting for conservationists/environmentalists to throw in with the anti-taxers to help push along the national sales tax. The so-called “fair tax” would add 75 cents a gallon or so to gas and drive down consumption of basically everything. Dealing with the world-wide depression that results, well…
June 3rd, 2009 at 10:51 am
Wouldn’t a congestion tax paid into the Highway trust fund represent a substantial transfer of wealth from denser blue areas to more sprawling red regions? Perhaps the congestions tax could be dedicated just to mass transit.
June 3rd, 2009 at 10:52 am
[...] See also) So, for the second year in a row, the highway trust fund will face the prospect of going broke, [...]
June 3rd, 2009 at 11:23 am
I keep waiting for conservationists/environmentalists to throw in with the anti-taxers to help push along the national sales tax.
Yeah, because desperate poverty stricken people are such great stewards of the environment…
The reason you “keep waiting” for this is because most environmentalists aren’t idiots and therefore favor progressive, rather than regressive, tax/distribution policies.
June 3rd, 2009 at 11:47 am
for the short term it seems that the obvious policy solution would be (run and hide!) a higher gasoline tax.
Surely the obvious policy solution is to stop earmarking the gas tax for the highway fund, stop restricting the highway fund to the gas tax, and have the gas tax go into general revenues and the highway fund come out of it? There’s no particular reason to expect the “right” level of gas tax to match the “right” level of expenditure on highways.
June 3rd, 2009 at 11:51 am
And despite the fact that this keeps not happening, your certainty that environmentalists would support such a thing remains undiminished.
June 3rd, 2009 at 12:04 pm
A point that isn’t made enough: very little of the maintenance/repair-necessitating damage done to roads is caused by passenger cars. Almost all of it is caused by heavy vehicles like buses and 18-wheelers.
I raise this point, because some might think that a VMT tax is an effective way to internalize the externality of roadway wear and tear, but it’s not.
June 3rd, 2009 at 12:29 pm
I raise this point, because some might think that a VMT tax is an effective way to internalize the externality of roadway wear and tear, but it’s not.
Yeah, as I noted above, what you would really want is a tax that factored in both miles and axle loads (with the relationship between axle loads and road damage itself being non-linear).
June 3rd, 2009 at 12:48 pm
DTM,
Why the Rube Goldberg device, instead of a simple and elegant gas tax?
June 3rd, 2009 at 1:09 pm
Raising the gas tax is the only rational option, though it is a political third rail. Plus, progressives should pause as it is a hugely regressive tax with no obvious way to ameliorate that. How about just taking mileage readings once a year at inspection time and taxing based on a simple formula figuring in vehicle weight too? That seems much easier to implement than GPS systems, etc. that seem to come up all the time, plus it has the advantage that it isn’t as bad politics–people don’t see the tax every days as they fill up their tanks. The tax could be paid with your income tax once a year and maybe their could be an income offset.
June 3rd, 2009 at 1:27 pm
DMonteith: check out European tax policies re: national sales taxes. They sneak them in as VAT’s. Check their consumption vs. savings rate and compare to ours. Also note how their populations have all been driven into poverty, not.
June 3rd, 2009 at 2:01 pm
DTM,
Why the Rube Goldberg device, instead of a simple and elegant gas tax?
I explained my basic reasoning in my 9:57am post above. The same basic dynamic will eventually apply to large vehicles as well: as alternate technologies are adopted, gas consumption will become an increasingly poor proxy for the benefit received from and costs imposed on our road system.
June 3rd, 2009 at 2:02 pm
since some roads and highways are paid for by state and local governments and some are paid for by the feds, how would they keep track of whether the miles being driven are being driven on locally funded roads and how many are drived on federally funded roads? Seems like a sticky wicket to me
June 3rd, 2009 at 2:08 pm
Th: check out where I said “tax/distribution policies”.
June 3rd, 2009 at 2:18 pm
You might also want to hop on the bandwagon of Dean Baker’s idea for by-the-mile car insurance: http://www.truthout.org/article/dean-baker-can-clean-insurance-fend-off-global-warming
June 3rd, 2009 at 2:54 pm
I don’t think anyone who favors a VMT really argues against raising the gas tax. It’s just…good luck with that. But honestly, a higher gas tax would be a great bridge to a VMT, because it would allow for a revenue-neutral tax swap in the future. The real problem is not the tax mechanism, but the low road tax rate in the U.S.
That said, one reason for getting started with a VMT now is that it will take a good ten years or more to phase in. All this stuff about how it will be awesome in the future sort of misses the point that you can’t just wish a VMT into place overnight.
Another thing: the wear-and-tear argument about trucks is pretty bogus. The major source of wear-and-tear to roads is time and weather, and there’s no reason passenger cars shouldn’t pay their share for routine maintenance.
I could continue on this topic pretty much forever, but I’ll just leave off by saying that the list of externalities associated with driving is a lot longer than people realize (accidents, anyone?). VMT is an excellent policy in principle, but it clearly faces an uphill climb, politically.
June 3rd, 2009 at 3:32 pm
Just auction the highways to private companies. What is so complicated?
40,000 people die every year in poorly manged government roads. Where are the congressional hearings? Where are the calls for “change?”
I have to think a private company working to improve the bottom line could handle the problems of congestion, wear and tear pricing, and insane number of highway deaths the government has so expertly ignored.
June 3rd, 2009 at 4:12 pm
Oregon has a weight-mile tax but no state fuel tax for commercial vehicles, so diesel fuel prices are lower than gasoline there. The trucking companies hate it because of the paperwork, but I think it makes sense and would be a good national model.
Since most of the destruction of existing roads is from heavy commercial vehicles, a weight-mile tax should be dedicated almost completely to road maintenance. Sure, they benefit from the extension of the road system from new construction, but relatively much less than they do from using the trunk routes.
In the largest urban areas time of day pricing makes sense for congestion control. Any revenues from it should be dedicated to public transportation to give people a higher level of service as an alternative.
But for relatively small private vehicles operating over the vast majority of the country at all times and everywhere at non-peak times a straightforward tax on fuel produces the optimum minimization of externalities while providing adequate revenue. One just needs to have politicians with enough integrity and bravery to raise the tax every so often.
I do realize that is almost an oxymoron but one can hope….
And one can support instant run-off voting and publicly funded political campaigns to increase the likelihood that those elected will fit the desirable profile of public spirited, well-educated, moderately progressive technocrat.
June 3rd, 2009 at 4:51 pm
First let me say that I chose a career and university degree that would let me live my entire life without commuting in a car, and that worked out well.
That said, an increase in the gas tax will simply create the belief that now, at last, we can build those new freeways to ’solve’ congestion. Your fancy arguments will mean nothing to the pea brains and think-tank sycophants who want more freeways.
The best way to stop freeway building is not to fund them. Let the freeway lovers strangle themselves with their own anti-tax zealotry. Pretend to be one of them and let your representatives know you are opposed to an increase in the gasoline tax.
Look at some of the comments above. Once we have instant run-off voting we can elect brave and intelligent representatives who will raise taxes to produce the optimum minimalization of externalities, spurring the development of cars which don’t pollute and, probably, also giving you a healthier whiter smile. You know you’re in trouble when the healthier whiter smile seems like the most achievable element in the Brave New World.
All of the money sent on roads from here on out is wasted. For once in your life sit back and watch the other side struggle with their fatal contradictions.
June 3rd, 2009 at 4:54 pm
thatGuy,
Certainly time and weather take a tool on the driving surface of highways. But cracks in post-1960 highways with rebar are almost entirely the result of repeated heavy loads.
No, repairing the surface with a layer of asphalt good for five years is not cheap, but it’s dramatically less expensive than replacing an in-service lane of roadway because it is breaking up. That is increasingly happening in the right hand lanes of all interstates more than about ten years old. Ten years ago is when the new “long-cure” concrete was widely adopted for new construction. It seems to be making a difference, although the surface seems inherently less smooth with it.
June 3rd, 2009 at 5:00 pm
CatOwner,
Representatives elected without special interest contributions would be far more likely to resist the road builders than those who the road builders paid to elect. That’s not that hard to understand.
Sure, people want roads, so roads would get built. But I expect that fewer overall would be built and more transit would be funded. That’s simply because in an increasingly urbanized America city dwellers want more of it. They may not want to ride it themselves, but they want more so the guy in the next car rides it.
But it doesn’t matter what their motive is. With more independent legislators — and since the payer calls the tune publicly funded elections would on average produce more independent representatives — urban people would be relatively more powerful. Ergo, more transit and (relatively) fewer roads.
But probably better maintained ones.
June 3rd, 2009 at 6:03 pm
Hey, that would all be great- and I’d finally get my pony.
But in the real world the “gas taxes pay for raods, dammit” crowd isn’t turning out to vote for subways because somebody else will ride them. Sure, they should. But, let’s face it, this crowd is not spending Saturday nights at Mensa parties.
For more detailed discussion of the thrust-and-parry of roadbuilding vs. transit, find the Seattle Transit Blog. Lots of nuts and bolts there of how roads and transit get funded, by whom and for whom.
June 3rd, 2009 at 8:24 pm
A higher gas tax is all well and good, but really the interstates need to be tolled.
June 3rd, 2009 at 8:28 pm
Wow, Serial Catowner you just won this thread. You know what? I’m going to sit back and enjoy a deficit for once. Let the highways crumble, I say. Did you know that in my home state some idiots want to use stimulus money to build a new expressway through a corridor of the most expensive real estate in the state? Conservatives will cheer this progress and at the same time tell me that it is impossible to get the right of way for high speed rail and that we stopped building new highways years ago. Its not that they’re stupid, its that they’re liars…
June 4th, 2009 at 4:48 pm
[...] Matthew Yglesias, Ryan Avent, and the Christian Science Monitor’s editorial board have all made compelling cases for raising the gas tax now. As Avent put it, “given the various externalities associated with driving and burning gas, it should be clear that reduced driving and gas consumption are good things, to be encouraged. Given the economic damage sustained by high oil prices last year, it again seems clear that reduced gas consumption is a good thing.” [...]