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Unintended Consequences

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June 10, 2009 – Comments (12) | RELATED TICKERS: GAS.DL2

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.

Deej

12 Comments – Post Your Own

#1) On June 10, 2009 at 7:13 AM, JakilaTheHun (99.94) wrote:

I agree with you on the "miles driven tax".  It's punitive to those who make efforts to reduce their energy consumption and rewards those who waste the most resources.  It would also be ridiculously invasive and expensive to implement.

The gas tax should be increased as it obvious that we spend more on building and maintaining roads than we bring in from gas tax revenues.  There is lots of political opposition to this, however, so Washington tries to find new and innovative ways to subsidize America's gas guzzling culture.

A higher gas tax is the best thing in the world, though.  For one --- it forces consumers to take accountability for their resource usage.  People hate taxes, but love subsidies --- which is why the gas tax hasn't been increased since the early '90s.  But this has had the affect of distorting the market and falsely giving Americans the belief that their energy consumption habits have been sustainable.  I'm of the belief that individuals should pay for their own expenses --- hence, setting the gas tax high enough to at least cover the direct expenses associated with highway maintainance is an absolute must.

I think more tolls should be used, as well, in high traffic areas.  Those that use the roads the most should pay the most significant costs --- not fair for those who don't use as much resources to have to subsidize those that do.  I'd particularly like to see tolls implemented for big trucks (e.g. 18 wheelers) that put the most wear-and-tear on the roads and cause the most problems.

Higher gas tax coupled with selective tolls would promote more cost-efficient mass transit, help de-clog the roadways, and make high-speed rail more economically viable.  It would also reward those that try to conserve resources, rather than punishing them by forcing them to subsidize everyone else through general income taxes.

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#2) On June 10, 2009 at 8:48 AM, lemoneater (75.29) wrote:

"Miles driven tax" what a horrible idea. Many people drive long distances out of necessity, not choice. Try living in some rural areas where the nearest grocery is 15 miles, but the better priced one is 30 miles, church is 45 miles, job is 40 miles or more, and the best clothing store is 65 miles away--based on the distances taken from my childhood in WV. I'm sure my distances are conservative and some ordinary Americans go even further to provide for their families. This draconian "miles driven tax" will tempt ordinary decent people to lie about their mileage. Not to mention what it will do to rural economies dependent on local tourism.

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#3) On June 10, 2009 at 8:55 AM, wrparks (64.02) wrote:

Yes, and my state of NC is mulling raising the rate even more right now.  Not sure what to think of it really......

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#4) On June 10, 2009 at 9:30 AM, outoffocus (21.94) wrote:

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. A miles driven tax would definitely take away a huge incentive of living in the suburbs.  I think downside from this tax may outweight the benefits of it.The reason most peopIe move into the farther suburbs is because you get all the benefits of the closer suburbs at about half the cost.   I know for me, a miles driven tax would be the final straw that would cause me to move closer to my job.  I drive upwards of 24000 miles a year, twice the national average.  With that 24k mileage I'm already adversely affected by higher gas prices, higher tolls, accelerated car maintenance costs, and higher insurance payments.  The "per mile" tax would add at least another $500 per year to an already high cost of commuting.   At that point there would be no incentive for me to live in the suburbs.  Also, I live in PA, which as you can see from the map above, has one of the highest gasoline taxes in the country. So I hope before any government decides to implement such a tax, that they would fully evaluate the cost of that tax. I think the parties that would suffer the most from per mile taxes are the peripheral counties that benefitted from the urban sprawl of the past 30 or so years.

 

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#5) On June 10, 2009 at 9:45 AM, dudemonkey (37.53) wrote:

We could put a tax on blog posts.  Between portefeille, GMX, and alstry we'd balance the budget. :)

If we could get EPS100Momentum back we'd be loaning money to China.

All glory to the Hypno Toad!!!

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#6) On June 10, 2009 at 9:46 AM, AllStarPortfolio (20.53) wrote:

The problem with taxing is that it doesn't correlate directly to revenue. The bureaucracy eats an enormous amount just counting the money over and over.

   I think i heard somewhere that only 23% of taxes is used for something besides running the bureaucracy. Can someone who knows give us some numbers on that?

-solaris

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#7) On June 10, 2009 at 9:55 AM, h2ound08 (< 20) wrote:

how would the government (either state or federal) go about keeping track of the mileage of every citizen?  would they send around employees to every house in america and check the mileage yearly?  equip all cars, new and old, with electronic mileage counters that trasfer the data directly to the govt?  require a mileage check everytime the car is inspected (probably the most efficient and effective way...) no matter how it happens, it seems like a terrible time/money consuming effort.  i think it would be better to just raise the gas tax, politicians be damned.

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#8) On June 10, 2009 at 10:12 AM, devoish (97.31) wrote:

According to the PNHP, overhead consumes 3.2% of US Medicare or Canadian NHI premiums, as opposed to private insurance at 12%.

I believe neither amount includes the expenses consumed in the Doctors Office.

I believe the data used is 4-5 years old.

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#9) On June 10, 2009 at 10:14 AM, lshreve1 (< 20) wrote:

If we are really bent on levying taxes, wouldn't a tanker transport tax on crude oil (tax seagoing tanker transport into US) serve several desired ends?  This might include reduction of tanker traffic and danger of spills in waterways.  This would raise overall prices but leave an incentive with domestic producers to provide more of the supply to domestic users.  I believe that most of our imported oil actually comes from Canada and Mexico, why could it not come through pipelines and remain in the same tax position as domestic producers, no conflict with NAFTA.  Piplelines tend to be tied to long term contracts, could this help stabilize oil markets?  Might this reduce wealth transfer to distant parts of the world to people whom we tend to distrust?  These are just some of my thoughts on the subject.

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#10) On June 10, 2009 at 10:15 AM, outoffocus (21.94) wrote:

According to the PNHP, overhead consumes 3.2% of US Medicare or Canadian NHI premiums, as opposed to private insurance at 12.

As a former US Government employee, I have a hard time believing that stat.

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#11) On June 10, 2009 at 10:42 AM, devoish (97.31) wrote:

Outoffocus,

The whole idea is foolish anyway. Some overhead is neccessary. Record keeping, and filing those records are both overhead. The real question is whether the overhead is neccessary. In the case of government the 75% stat could include filing legal documents, architectural drawings, etc.

Overhead is a large part of what the Government has to do, and it is not neccessarily a bad thing.

Here is a link to what I believe is the report cited for the statistic and how it was arrived at. Enjoy.

 

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#12) On June 10, 2009 at 4:09 PM, bostoncelitcs (40.51) wrote:

Dude......do you "believe" everything you read??  The majority of "damage" done to our roads and bridges is not done by Joe six-pack driving his pickup and Mary the soccer-mom driving their mini-vans......It's done by the 18 wheeler's and the trucking industry

If the Koch family and far-right conservatives want a damn Tea Party......this is what they should be complaining about.......Not the increase of taxes of those making over $250,000/year!!

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