I came across a fascinating article about the unintended consequences of the government's recently passed increased fuel efficiency standards (average per-fleet fuel economy of 35.5 mpg for cars by 2016) this morning:
The downside of lower gas taxes
I'm all for less pollution and less reliance upon foreign oil, but reducing the amount of gasoline that Americans buy will dramatically reduce the amount of tax revenue that can be used to repair our roads and bridges. Gasoline taxes are the main source of funding for road repairs. The federal government collects $0.184 per gallon in tax on gas plus every state tacks on its own taxes of between $0.20 and $0.40. By intentionally reducing the amount of gas that consumers use, the government will begin to choke off this source of revenue.
Don't worry though, I'm sure that the government will find some new way to tax us. Oregon is testing a program that replaces its gasoline tax with one that's based upon the number of miles than residents drive. Other states are considering implementing similar systems. The federal government is studying implementing a miles-driven tax as well. Despite the current Administration's denials, I would not be surprised if the Federal government ultimately implemented a similar system. The National Surface Transportation Infrastructure Financing Commission estimates that in order to generate enough revenue to maintain America's roads a tax of approximately 2.3 cents per mile would have to be implemented.
The commission claims that the government will currently have a shortfall of around $400 billion for federal highway and transit projects from 2010 through 2015. For now, the commission is suggesting that the government raise the federal tax on gasoline by 10% (it hasn’t changed since 1993). This money is going to have to come from somewhere.
As someone who lives fairly far away from his office, but chooses to drive a relatively fuel efficient vehicle to help lessen the cost of his commute I obviously am no fan of the miles driven tax. I wonder if the implementation of such a tax would have a negative impact upon the home prices in many suburban communities.
Whatever happens, I suspect that higher taxes are coming. Higher taxes in the future will act as a drag upon economic growth, which I have said repeatedly I believe will be much slower over then ext several years than it has been over the past two decades.