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.

  • 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!