Sunday, February 05, 2012

Why we should raise taxes on gas

Opponents of public transportation often complain about the subsidies buses, streetcars, and trains receive from the government. Many of these opponents don't realize that roads receive massive subsidies too.

The federal gas tax hasn't been raised since 1993. Given the reality of inflation, that means it's effectively gone down in the last 19 years. These taxes pay for about half of all road construction and upkeep. The other 50% comes from other sources--your pocket. Even if you never use public roads, you still pay for 50% of their costs.

To make this worse, some aspects of tax law encourages companies to drive. A small business owner who drives from Idaho Falls to Boise and back again for business purposes drives about 560 miles. As of the last few months of 2011, she could reduce her income by $311 for making the drive. If she made the trip twice a week, that's $32,344. Say her gross profits in one year are $60,000, she has other business costs of $10,000, and she does all that driving. Her income for federal tax purposes is less than $18,000--but, unless she's driving a major gas guzzler (think Hummer 1) or a sports car, she is in reality holding on to a lot more than $18,000.

If a business owner flies or takes public transportation instead, roads will get used less, less toxic fumes will be spewed into the atmosphere, and yet the business owner can only reduce her income by the actual cost of the transportation.

In addition, employers can get tax breaks for paying for their employees' parking costs, but not for paying for their employees' public transportation costs.

So there's certainly an incentive to drive--the massive subsidy roads receive outside of the gas tax, and a massive reduction of income for tax purposes for small businesses.

No doubt most people drive on roads, and almost everyone profits from goods and services that arrive from roads. So why raise taxes on gasoline instead of continuing to charge everyone for road use?

To put the cost of using roads where it actually belongs. People who use roads more--and people who drive larger vehicles that cause more wear and tear on roads--should be the ones paying for it. This would increase incentives to shorten or eliminate commutes, shift the economy to be more local-driven, decrease the number of gas-guzzlers on the road, and basically create a fairness in the system.

Public transportation would be a much more attractive option.

Our use of gasoline would plummet, and we would be less reliant on unstable gasoline from the Middle East. (By the way, oil reserves in more stable countries are much, much smaller than in the Middle East--no amount of Drill, Baby, Drill within the borders of the U.S. will get us enough oil for our current needs. Why do you think we went into Iraq in the first place?) The less reliant the rest of the world is on gasoline, the less powerful--and less dangerous--the Middle East becomes.

Environmental reasons. Even if you disagree with 98% of the scientists in the field who state that climate change is occurring, clean air is still important. Dirty air causes a multitude of health problems and is just plain nasty. Raising gas taxes would decrease the amount of pollutants and would result in cleaner air.

What about downsides?

Prices will go up, especially on products that have to be transported long distances. But why is it a bad thing if the price of the product reflects its actual price, and not its subsidized-by-taxes price?

Public transportation costs would go up (at least for modes of public transportation that use gasoline). Sure, but it would still be a more cost-effective mode of transportation than driving.

The gas tax wouldn't be 100% effective--vehicles that don't use gasoline wouldn't be taxed for using roads, and gasoline that's used in other places--like lawn mowers--would be charged. Part of this might be a positive result--an incentive for electric cars, for example. And lawn mowers and such make up a very small percentage of gasoline use--and a higher tax on gasoline would be a great incentive for lawn mower makers to create more gas-effective machines. Still, this is the biggest downside I can see--but it's much better than the alternative, which is to let the general public subsidize roads.

Raising taxes is very rarely a popular move. But in this case it makes sense. Will it happen? No. But it should.

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