With the US economy in the tank, could it possibly make sense to increase the tax burden?
An increase in the state gas tax just might a win-win—boosting the economy while benefiting the environment. Several states—including Oregon, California, Massachusetts, New Hampshire, and Illinois—are considering gas tax increases. Just consider some of the possible benefits:
Less pollution. Last year, we saw that higher gas prices encourage people to drive less, which means less pollution from cars and trucks…and the emissions reductions are long term. Many transportation demand management tools, such as rideshare programs and telecommuting, reduce driving for a while. But as traffic eases, the improved roadway conditions soon encourage people back to the highways. However, increased gas prices are different. When gas prices go up enough, people drive less for purely economic reasons, rather than congestion-related reasons, so a substantial gas tax increase would provide long-term driving reductions.
Fewer car crashes. If people drive less, they crash less. This is a bigger deal than you may think, since car crashes take a surprising toll on public health and the economy.
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Improved vehicle efficiency. Gas tax increases encourage the demand for—and therefore supply of—more efficient vehicles. This will reduce our oil dependence and may help to transform and revive our ailing automobile industry.
Increased government funding. When gas prices spiked, most of the money we spent to fill our cars left the state, to pay for oil imports. But revenues from gas tax increases stay here. Money that we spend on gas taxes generates revenues that can be spent locally on projects that will help us now and in the future.
This raises another issue, however. Washington’s and Oregon’s state constitutions require that gas taxes be used to pay for roadway projects. So, it is possible that an revenues from gas taxes may be used in counterproductive ways, such as to add more lanes. However, since the transportation impacts on a gas tax increase are long term, there will not be an increase in driving, provided the gas tax is high enough. We have some proof of this, by observing what happened when gas prices rose to more than $4 per gallon. The constitutional limitation that the funds be spent on roadways is not necessarily bad in our case, since we have plenty of roads and bridges in need of repair and replacement for which we are struggling to find funding. So, at least for now, we likely will not need a constitutional amendment on this issue.
For those who balk at the idea of a gas tax, citing that it is regressive, there are many arguments against this claim, most of which are based on the (granted, arguable) premise that the poor buy less gasoline (see here for the basic, common arguments). So, the purpose of the increased gas tax is to realize the many benefits stated above, not to decrease the gap between the wealthiest and poorest of our society. I believe there are more effective ways to more directly reduce this gap, by revisiting policies associated with the minimum wage, healthcare, education, and income taxes.
Given current gas prices, the gas tax increase would need to be fairly large to achieve many of the aforementioned benefits; however, the potential benefits are substantial. A gas tax increase would be a tough sell, however, given that Washington State recently increased its gas tax, and as of January 2009, has the second-highest combined gas tax in the country. On the other hand, now may be a good time to act on this, when gas prices are relatively low. After all, just a few scant months ago, we were willing to pay more than $4 per gallon for gas, and almost none of those revenues benefited us in any way.
Benita Beamon is the newest Sightline Fellow. She is an associate professor of industrial engineering at the University of Washington and an expert in road pricing.
Note – In the original version of this post, we indicated that Washington had the nation’s highest gas tax; but our numbers were outdated. Washington is actually second-highest. Thanks to the attentive reader who pointed this out!
Dear Benita, I have one thing to say to you. You’re an idiot!!!! High gas prices are what got us into the economic mess we’re now in. High gas prices means high costs for everything from food to the clothes we buy – EVERYTHING! We want to get out of this mess not prolong it. Low gas prices are essential to getting our economy going again, along with lower taxes for everyone. We can’t spend money if our money is being ripped from our paychecks. We already have one of the highest gas taxes and highest gas prices in the country, so let’s not make it worse – OK?
Any added gasoline tax must be high enough to offset the tax lost when each person cuts back on gas and oil consumption. And when gasoline hits $4/gallon, before surging higher where it will never come back down due to peak oil and increased worldly demand, consumers will cut back even more, forcing our energy reliant economy further down the toilet.Our entire economy has relied on the happy-free motorist who goes from point A to point B and spending X amount of dollars along the way. But the motorist who travels less, spends less; therefore keeping more money in the bank and out of the hands of the auto industry and State governments –which explains the auto industry’s paltry fuel mileage standards and government’s reluctance to do the right thing. Additionally, driving your car less means fewer repairs which negatively impacts auto repair and maintenance shops. And longer lasting cars means fewer new car sales, resulting in lost business and tax revenue. The car owner benefits in the short-term, but the State and its citizens will feel the economic pain in the long-term. Raise the gas tax, let the pain begin! It’s time for everyone to realize our way of life has forever changed. The time has come to stop pretending we can sustain the unsubstainable. Charge!
Benita is absolutely right. Low gas prices, far from being the engine that fires our prosperity, now fires our falling place among other nations. Europeans have been paying higher gas prices (due to taxation) for years. Their tax has helped make their vehicle choices smarter, paid for more transportation options (better bus services, long distance high speed rail, inter and intra-city rail options) than we have and have fostered smarter transportation policy. We have been made stupid by our myopia concerning cheap fuel. It has left us terribly ill equipped to face the inevitable increase in fuel costs anyway as our access to oil becomes diminished anyway. Time to get a clue, folks. Start raising gas taxes (gas prices) in a controlled fashion now, avoid huge price swings in the interim and start preparing for the time when gasoline become a minor fuel in our energy mix.
Thanks Benita for this post. The first commenter’s rude response aside, obiviously high gas prices didn’t get us here; rather high-priced / low-performance wall street types largely did. Low gas prices, though, got us into the related mess of dependence on foreign oil, and the subsequent cascades of bloody wars for oil and terrorism.The strongest argument for a gas tax, indeed a broad carbon tax, is the need to pay the true cost of products and services; that cost which accurately reflects the ultimate damage done to the natural capital of the enviroment we depend on, as well as to human health and security.