To Gas Tax Or Not To Gas Tax. That Is The Question

In the coming age of electric vehicles, what will be the fate of the gas tax? Taxes are never popular. The infamous Senator Huey Long once explained tax policy this way. “Don’t tax you. Don’t tax me. Let’s tax that fellow behind the tree.”

Should the gas tax be indexed

Automobiles are wonderful devices, but they aren’t much good without the infrastructure that makes driving into town or across the country possible.  Roads, bridges, and tunnels are expensive. Not only do they cost a lot to build, they cost a lot to maintain. Since 1932, the federal government has imposed a tax on every gallon of gasoline sold. In theory, the money collected goes into a trust fund. It is to be used solely to fund infrastructure improvements and maintenance.

Except politicians are spineless wimps. They would rather siphon off money from the general treasury than be forced to vote for an increase in the gas tax. That leaves no way to account for the increase in costs to build and maintain our roads that happens over time. Today, gas taxes aren’t high enough to pay for even half the cost of our transportation infrastructure. Electric cars and CAFE regulations make the problem worse. If people buy less gas, less revenue is collected, which leaves less money for roads.

California and Oregon are experimenting with computer applications that will track how many miles a driver covers. The theory is people who drive more should pay more. That makes sense, but there are some issues. Many of us are not thrilled with our government knowing where we go and when we go there. Our every e-mail, phone call, and mouse click is already recorded an analyzed by dozens of federal security agencies tasked with protecting us from the latest threat du jour.

In Oregon, more than 1,000 drivers have volunteered to be part of a “pay as you go” program. They are billed monthly for the miles they drive. In exchange, they are exempt from paying the state’s gas tax. The California program is theoretical only. Participants only get virtual bills from the state. In addition to the technical issue of whether states can or should track the movements of millions of vehicles, the “pay as you go” system has the same built in problem as the current gas tax — it is not automatically indexed to the inevitable increase in the cost of maintaining the transportation infrastructure.

That is the solution proposed by a group calling itself Tax Justice. It favors the indexing approach, saying that even if tracking miles driven is possible, it won’t help resolve the shortfall in revenue that exists today. Only reforming the gas tax system so it automatically adjusts for increasing costs will do, the group says.

In fact, that’s precisely what several states are doing. Florida, Georgia, Maryland, Rhode Island, and Utah index their gas tax rates. California does a variation that makes little sense. It ties the amount of its gas tax to the price of fuel. When gas prices decline, as they have over the past 18 months, there is less money coming in to fix the roads. Whoever thought up that idea should get an award for stupidity.

Paying per mile is actually no different than paying for parking. Both are a charge based on usage. As electric cars become more common, states and the federal government are going to need to rethink how we pay for our roads. “Pay as you go” plans will probably become more popular. But they need to be indexed to actual costs of road construction and maintenance if they are to be effective. Leaving it up to politicians to set the rates will doom them to failure.


Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.