In Defense Of The Gas Tax (Sort Of)

BERLIN, GERMANY – MARCH 23: A gas station staff fills a car with fuel at a filling station on… [+] In Berlin, Germany, on March 23, 2010. Higher gasoline prices, according to German President Horst Koehler, are the surest way to persuade traditionally car-loving Germans to seek more ecologically friendly alternatives, a statement that has already enraged the automobile lobby. (Photo courtesy of Getty Images/Sean Gallup)
courtesy of Getty Images
A practical definition of insanity, according to Albert Einstein, is doing the same thing over and over again and expecting different results. Add me to the list of insane people: Let’s take a look at the federal gas tax (again).
To refresh your memory, the federal gas tax is 18.3 cents per gallon for normal and 24.3 cents per gallon for diesel, and it hasn’t changed since 1993.
I understand that paying taxes is a chore that no one enjoys. However, in terms of tax policy, the gas tax is about as beautiful as a society can get.
Historically, the tax has been compared to a user fee. Motorists pay it when they fill up their tanks, and the proceeds go toward the country’s transportation and infrastructure needs. Those who bear the burden and those who benefit from it are a perfect combination.
Infrastructure has recently been in the headlines, in case you missed it. Two infrastructure bills are currently making their way through Congress.
The first has bipartisan support and is estimated to cost $1 trillion. Only Democrats favor the second infrastructure package, which has a larger price tag of roughly $4 trillion or $5 trillion, bringing the total new spending to $6 trillion. That amount has frightened some people, who are concerned about the long-term repercussions of deficit spending.
Infrastructure spending is a topic that appeals to me since it incorporates positive externalities. The national highway system was once just another infrastructure project, yet it has benefited American culture for generations. Imagine the return on investment if we compared the amount spent to the amount saved.
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Beautiful nighttime roadway with streetlights.
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But I’m getting ahead of myself. Let’s put the infrastructure argument on the back burner for now.
The question is, how will Congress pay for all of this? (even if we limit our frame of reference to the bipartisan plan). We got a sneak peek at the revenue raisers that lawmakers are considering. The list of pay-fors, much to my (expected) disappointment, does not contain an increase in the federal gas tax.
In fact, a group of Republican lawmakers recently proposed indexing the gasoline tax to inflation. Some, such as Ohio Senator Rob Portman, have made a point of referring to the gas tax as a user charge in an attempt to appeal to conservative sensibilities.
Because Portman isn’t running for reelection in 2022, he can talk about hiking the gas tax. In my ideal world, our elected representatives would be able to discuss tax policy without consideration to election cycles.
Notably, China, our worldwide opponent, enjoys nothing more than investing large sums of tax income into public infrastructure projects. The Chinese say that investing in infrastructure pays for itself. But, once more, I digress.
Democrats have ruled out any changes to the gas tax this time around. Their reasoning was that such increase would appear to be in violation of President Biden’s campaign promise not to raise taxes on families earning less than $400,000 a year.
In my ideal world, presidential candidates would no longer make promises that they would never raise taxes on specific groups of people. In the actual world, this might mean they’ll never get elected.
Here’s something to keep in mind while discussing the gas tax in the future: The idea that it works as a user charge needs to be reconsidered. Why? You can thank Elon Musk for it.
The gas tax has a Tesla problem, which some readers will know as a form of the free-rider mentality (pun intended). There are no gas tanks in plug-in vehicles. Despite the fact that their drivers do not pay the gas tax, they benefit from the roads, highways, and bridges that it funds.
One idea is to levy a separate mileage-based tax on electric vehicles in addition to the gas tax. Owners of these vehicles would keep track of their annual mileage and report it to their state’s motor vehicle agency, which would then issue them tax invoices.

Electric vehicles are becoming more prevalent on the road.
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If we want to be very fancy, we can have technology handle the reporting for us.
Today’s e-vehicles are essentially computers on wheels, complete with GPS mapping capabilities. The autos were significantly more capable of keeping track of annual mileage than their owners. The resulting information might be sent to the state Department of Motor Vehicles, and drivers could pay the tax when renewing their state vehicle registrations.
The tax could be assessed and collected by states, with funds remitted to the federal government. States could also be given the authority to keep a portion of the tax revenue as a deposit for federal transportation monies.
Voila! We’ve returned to a near-ideal user fee that balances costs and benefits. What’s not to appreciate about that?
This reformed tax could be a major source of revenue for awaiting infrastructure projects. However, it appears doubtful due to shortsighted political reasons. Once again, and likely not for the last time, tax politics has prevailed over tax policy.
Nonetheless, don’t be surprised if a mileage-based tax becomes a reality in the future. Your car’s GPS system is on its way to becoming a deputized tax collector, not just a creative technique to help with navigation./nRead More