Wednesday, November 23, 2011

The Economist Is Three Weeks Behind Me

Almost 3 weeks ago I wrote the following:
If you drive a high-mpg vehicle, you don't get dinged with high gas taxes. However, if everybody drove high-mpg vehicles, we'd use less gas--which means the states and feds would get less gas tax revenue. Problem is, the roads would still need maintenance, so the taxes would have to be increased!

If everyone does it, there's no economic benefit to conservation.

Maybe someone at The Economist reads this blog :-) because here's what they reported in last week's edition:
And just as cars are growing more fuel-efficient, Americans are driving less. In 2010 they drove just under three trillion miles—less than they did in 2006. While better fuel-efficiency is good news for Americans’ wallets and less driving good for the country’s air, for its highways and mass-transit systems, it is something of a disaster.

That is because federal funds, mostly derived from fuel-tax revenue, account for 22% of all highway funding and 17% of mass-transit funding nationally (with the rest coming from state and local governments)...

But as that trend has slowed, the HTF (Highway Trust Fund, which is funded by federal gas tax monies) has suffered: monies paid into the HTF fell by around one-seventh from 2007 to 2010. From 2005 to 2009 every state received more from the fund than they paid in. Between 2008 and 2010 Congress transferred $34.5 billion in general revenues into the HTF—the first time it had ever received such an infusion. Earlier this year the Congressional Budget Office forecast that the HTF will be unable to fund highway maintenance by 2013.

So, what's the fair (don't you love that word??), or reasonable, or practical, way to fund highway maintenance?


Anonymous said...

Darren: "So, what's the fair (don't you love that word??), or reasonable, or practical, way to fund highway maintenance?"

Um ... raise the gas taxes enough to make up for the increase in fuel efficiency?

I don't actually see anything unfair, unreasonable or impractical about this. And the story to the voters is pretty easy, too.

What's the problem?

-Mark Roulo

Darren said...

"It's regressive, and would hurt the poor the most." Can't you hear it already?

Ellen K said...

You can apply that same rationale to water conservation. The water districts put almost all of Texas on rationing, but as a result are seeing less revenue. Consequently there is talk about raising the cost of water and sewer services. This is also what happened when the property values collapsed. Suddening all the entities, including school districts, funded by property tax revenues were short on funds.

maxutils said...

We've discussed this privately . . . but it IS a regressive tax and it WILL hurt the poor more. As does any sales tax or fixed fee. It hurts the poor even more as they are less likely to own high mpg vehicles. Secondly, any tax on an activity or good will discourage the use of said activity or good. Sometimes that can be beneficial (alcohol, cigarettes) but it will always encourage avoidance, which leads to revenues dwindling. So, don't complain when it happens; and if you try to fight it by raising the rate, you will only make the problem worse and increase the deadweight loss and the inefficiency of the tax. That's why we should tax the one thing that most people can't avoid: earn income. It may not be perfect, but like democracy, it's the worst system except everything else.