The Tax Foundation notes that Republican presidential candidate Nikki Haley has proposed to save consumers money by eliminating federal fuel taxes. That’s an extremely short-sighted idea that would actually cost consumers in the long run. As the foundation’s writers, Alex Muresianu and William McBride, observe, Haley could have proposed that the gas tax, an imperfect user fee, be replaced with a better user fee such as a mileage-based fee. But instead she proposed to simply eliminate the tax.
A sunset for gas taxes?
The most recent report indicates that, as of yesterday, the price of regular gasoline averaged about $3.64 nationwide. Eliminating the federal gas tax would reduce that to by 18¢ to $3.46 a gallon — less than 5 percent. Encouraging more domestic oil production could cut fuel prices by more than a dollar a gallon, down to what prices were in around 2015-2020. If Haley wants driving to be more affordable (which I think would be a good thing), that’s what she should promote.
Rather than save consumers money, eliminating fuel taxes without find another alternate source of revenues (preferably some sort of road user fee) will simply exacerbate problems with infrastructure maintenance. This will create another demand for some giant infrastructure bill to repair all the roads neglected because of no more highway revenues. The inflation caused by the infrastructure bill of 2021 cost consumers far more than 18 cents a gallon. In general, people can get something for free if they want it, but it will be of poor quality and they won’t get much of it.
The good news is that the movement towards mileage-based user fees isn’t dead. A month ago, a group called the Eastern Transportation Coalition released a report supporting mileage based user fees for trucks, something that already exists in Oregon but, as far as I know, no other state. A week ago, the federal government took an important step towards a federal mileage-based user fee. Oregon, Utah, and Virginia are already charging mileage-based fees to owners of electric vehicles. Rather than abolish the federal gas tax, politicians should find ways to make it work better.
Reduce FEDERAL fees, and for every penny add on to the state.
Federal gas tax is 18.6 cents.
States it’s variable.
Point is 18.6 cents means little, it’s just ear mark money for the federal government to fuq with to the tune of 25 Billion dollars a year. States accumulate 70-80 Billion……..
– Oklahoma, have been embroiled in a multi-year battle with the state’s turnpike authority regarding a highway expansion project that will cost $5 billion
– The North Houston Highway Improvement Project in Houston, Texas will expect to cost 10 Billion
Sure ONE MORE LANE will solve the traffic dilemma.
Cato makes a pro-Haley argument against the Federal tax, essentially that sending tax money to DC, only to have it go back to states and localities (with strings attached and bureaucrats employed) is inherently inefficient. https://www.cato.org/blog/nikki-haley-right-repeal-federal-gas-tax
“… politicians should find ways to make it work better.”
First, politicians *should* stop stealing from it! 15-1/2 percent of the gas tax is skimmed off the top and deposited into the “Mass Transit Account”, from which it is diverted to pay for a plethora of costly transit boondoggles and to which, transit users don’t contribute a dime. Billions more are also diverted from the Highway Account via transfers by the states and programs such as CMAQ.
Second, politicians *should* create a mileage based TRANSIT USER TAX and distribute revenue back to the states, in proportion to ridership, e. g., x dollars per passenger rather than x billion dollars per year, without regard to ridership.
But that will never happen, because politicians are not driven by common sense. Transportation funding policy is so fukedup, that it is beyond salvaging. (Exhibit A: We are now using highway tax revenue to, get this, tear down highways!)
So, I’m going with Haley’s Plan B. Let’s end the pretense that highway users are paying for highways in proportion to their use of highways.
Let’s sunset the shell games and fund ALL transportation from general funds.
I wholly agree with the antiplanner for once. Road taxes are essential for their maintenance, which is the most expensive part for roads. It’s part of why american style suburbs are unsustainable, because they have so many roads for so little tax return.
And that’s why the suburbs are withering away to nothing!