October 2, 2013

DOES THE GAS TAX HAVE A FUTURE?

Because the tax has no mechanism to account for inflation, revenues are falling below the increasing costs of road maintenance. The CBO projects that next year Congress will need to allocate $13 billion from the general treasury in order to keep the highway trust fund afloat. According to the Institute on Taxation and Economic Policy (ITEP), a non-partisan organization, the trust fund would be fully funded had the 1993 tax been indexed to inflation.

There’s another problem for the gas tax going forward: it can’t account for the advent of hybrids, electric cars, and ever-increasing gas mileage. Drivers of high-mileage cars are freeloading on the gas-guzzlers, enjoying the luxury of well-maintained roads without paying their share of the costs.

Richard A. Stafford, director of Carnegie Mellon University’s Traffic 21 initiative, tells VM, “The march of alternative ways to power vehicles (natural gas, natural gas liquids, electric) make any oil-based tax antiquated whether it’s on wholesale or retail and whether it’s indexed with inflation or not.” If that’s the case, we might want to replace the gas tax altogether with some kind of fee based on miles traveled – though we can see how implementing such a policy could get hairy.

Also, I thought we wanted to encourage alternative fuel technologies. Or is that only when we can funnel money into crony-capitalist operations like GreenTech?

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