Yahoo news today is reporting that the Federal Highway Trust Fund that pays for highway construction and maintenance is in danger of going broke. Since Americans started really driving less in 2007, gasoline tax revenues (which are the primary source of funding for the Trust Fund) have been down. Even Republican George Voinovich is on the record as stating that the gasoline tax needs to be increased. But a "panel of experts" has suggested that the best way to raise revenue is to charge people by the mile. Every car would be equipped with a GPS tracking device, and it would not only calculate how many miles you drove, but whether you drove on an interstate, highway, rural road, etc.
On the surface, this sounds rational. The more miles you drive, obviously the more impact you have on the road conditions. Unfortunately, there is a major flaw with this argument. By taking away the gasoline tax and replacing it with a mileage tax, you disincentivize the purchase of fuel-efficient cars. When gas prices go higher, either due to market forces or additional taxes, people tend to drive less and buy more fuel efficient cars. Hell, I did just that last summer, buying a salvage title 1997 BMW 328i to do long distance commuting in, instead of my 14 mpg Jeep Grand Cherokee. In Europe, gasoline taxes are very high, resulting in costs for unleaded gasoline in the $7/gallon equivalent range. Which explains why both small cars are very popular in Europe, even as luxury cars (see the BMW 1-series and Audi A3 as examples), and why you can buy just about any car in Europe and get an optional diesel engine. Diesel fuel costs are roughly half of what gasoline costs are in Europe, due mainly to the tax breaks offered for the greater fuel-efficiency of diesel. Removing this incentive tool here would simply convince people that it won't make much of a difference whether they buy the V6 versus the 4cyl engine, or whether they get a 7 passenger Chevy Tahoe truck-based SUV that gets 15 mpg combined versus a Chevy Avalanche 7 passenger crossover SUV that gets a combined 19 mpg.
I'm not in favor of taxes in general. Personally, I think a flat income tax of 15% with very few loopholes would probably do a better job of generating revenue than the current system, and it could possibly allow for the elimination of some current taxes. But however it shakes out, a per gallon tax on gasoline is the best compromise for raising Highway funds, while still encouraging increased fuel-efficiency, which itself leads to less dependence on foreign oil and fewer greenhouse gas emissions. That's what I have to say.
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Well yes, but from the full article it seems that disincentivizing fuel efficient vehicles is the point:
"The two panels also said fuel taxes are not a sustainable source of revenue over the long term as drivers shift to more fuel efficient vehicles."So Obama's promotion of green, "sustainable" vehicles make the tax an UNsustainable source of revenue -- some irony. The solution for which is to eliminate the incentive for the fuel-efficient cars in the first place, something which is at odds with all of the administration's public statements on this issue up until this point.
I'm a bit torn on this one, though. On the one hand, high gas taxes have the side benefit of encouraging fuel-efficient and smaller cars, as you mentioned. A mileage tax might conceivably result in even greater emissions reductions, though, by forcing people to place a clear value on the daily driving they do. This might dramatically reduce discretionary driving among Americans, and, over time, encourage others to move closer to work -- better and more "sustainable" solutions than simply driving more fuel-efficient cars.
Of course there are other issues with it that would potentially sink it, e.g. administrative costs, the huge potential for fraud and evasion, the fact that the "gain" from such revenues could be wiped out in short order by changed habits (whereas the shift to fuel-efficient cars took decades) and most of all big time privacy issues involved in tracking every car with GPS.
I knew I forgot something when I was trying to crank out this post...the privacy issue. Where are we going? What are we doing? Are we speeding? Personally, I don't like being watched that closely. That being said, I am also somewhat biased against the idea of a mileage tax, mainly because with my job I have to drive a lot (I do government consulting work), and it doesn't matter how close I live to the office, when I've got clients who are located 70 miles from the office and nowhere near any mass transit beyond local bus service. Since the idea of completely reconfiguring our cities to be mass transit-friendly is utterly infeasible, the best way to cut back on the dependence on oil and greenhouse gas emissions is to build more fuel-efficient cars. To do that, the manufacturers need to see the demand to support the engineering that would go into these vehicles. With gas prices as relatively low as they are, the only way to do that is either a government subsidy to the manufacturers (and where would that money come from?), or increased gasoline taxes.
At the rate the car companies are going, we may not have a choice as to what vehicles we buy.
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