Editor’s note: This op-ed is by Moshe Braner of Essex.
The question of how to pay for the maintenance of transportation infrastructure is coming to the fore in Vermont and nationally. After years of unwisely deferring maintenance, roads and bridges are crumbling and the economy is threatened as a result. The main funding source has been the gasoline taxes (both national and state). Gasoline tax receipts have decreased due to a decline in miles driven (about 10 percent nationally since 2008), and a gradual shift to more efficient vehicles. Meanwhile, the costs of infrastructure maintenance have increased as they are tightly linked to the price of petroleum which has tripled and is not going back.
So what should we do? We have a choice: to not have usable roads, or to pay for them. I think the answer is obvious. Some kind of tax must be increased. The history of the funding mechanisms hint that as a society we agree that the ideal tax for the purpose would have the following characteristics:
• Those who use the roads should pay for them.
• Those who drive more should pay more.
• Heavier vehicles cause more road damage, and should pay more.
• The tax needs to be adjustable to fit funding needs.
• The tax mechanism should not cost much to administer.
• The tax mechanism should not infringe on drivers’ privacy.
• The tax mechanism should be applicable to new vehicle technologies.
The gasoline tax fits all those criteria except the last:
• Those who do not buy motor fuel do not pay.
• Those who drive more buy more fuel and thus pay more.
• Heavier vehicles use more fuel and thus pay more.
• The tax rate (cents per gallon) can be adjusted to fit funding needs.
• The gasoline tax costs little to administer, and increasing its rate
• has negligible additional administrative costs.
• The gasoline tax does not infringe on drivers’ privacy.
But what about new vehicle technologies? Plug-in hybrids get some of their energy from electricity, and electric cars use no gasoline at all. Should we worry about their operators not paying the tax?
Currently non-petroleum-fueled vehicles are heavily subsidized, with huge tax credits for their purchase. Trying to tax their use is a case of “right hand doesn’t know what the left hand is doing.”
Instead, we can start by gradually reducing those subsidies. Those types of vehicles are presently very rare. If and when they comprise a significant portion of the fleet we’ll need to re-think, but we are a very long ways from that. If we ever actually reach that point we should consider it a success!
Raising motor fuel taxes encourages more efficient transportation (smaller cars, carpooling, public transit, etc). Proposals to base a tax on miles driven rather than fuel usage are contrary to the declared policies of encouraging efficiency and conservation, as the Hummer driver would pay the same as the Prius driver.
Suggestions for raising the gasoline tax rate always elicit cries of “we cannot afford it.” But that is a specious argument, since we used to pay more, before we started using less gasoline. Compare with what we do with education funding: first we vote on a school budget, then the tax rates are set to fit the budget. A decline in property values does not reduce the funding, instead the property tax rates are increased accordingly. The same can and should be done with the gasoline tax.
The current state tax is 20 cents a gallon. For a frugal 10,000 annual miles at 40 mpg that is $50 — less than the current annual registration fee for one car. Indeed the gas tax is only about a quarter of the state taxes currently directed towards road maintenance, while a half is from motor vehicle fees and purchase and use taxes. Gasoline prices are already high and volatile, the needed extra tax would be hardly noticeable. The federal gas tax should have been increased long ago. It wasn’t, leading to cuts in federal funds for road maintenance. This can be partially remedied by raising the state gas tax instead.
Raising motor fuel taxes encourages more efficient transportation (smaller cars, carpooling, public transit, etc). Proposals to base a tax on miles driven rather than fuel usage are contrary to the declared policies of encouraging efficiency and conservation, as the Hummer driver would pay the same as the Prius driver. No doubt it could be tweaked, making the per-mile tax rate higher for heavier vehicles. But then it’s functionally equivalent to a fuel tax, since fuel consumption is more-or-less proportional to weight. So might as well simply increase the fuel tax and be done with it.
Alas the fuel tax is regressive, in the sense that those with lower income have to pay a similar amount as those with higher income, to the extent that they drive similar distances. That can be compensated for by reducing the many other regressive taxes we have (property and sales), raising the income tax rates, and increasing the standard deduction (or low income tax credits) for the income tax. Since any type of road fund is a “broad-based tax,” it justifies tweaking the other broad-based taxes to compensate.
Other transportation tax ideas being discussed have severe shortcomings. Most are regressive, not just with respect to income but also road usage. E.g., the ever-higher annual registration “fee” (which is certainly a tax) extracts the same amount of money from frequent drivers as from the proverbial “little old lady.” It is not related to miles driven nor to vehicle weight and thus not commensurate with the benefit the operator receives from usage of the road nor the damage caused to the road. All the proposed new taxes have significant administrative costs, and some of them require expensive new hardware, such as GPS devices on all cars — that are also a threat to privacy.
All fossil fuels we use in Vermont are imported into the state, at a cost of billions of dollars lost to the state economy. Higher fuel tax rates and lower fuel usage mean more money stays and circulates within the state economy. Moreover, burning the fuels causes climate chaos. If we are serious about encouraging conservation of fossil fuels, we should tax them, rather than taxing something else. Make the taxes proportional to fuel usage, and reduce all the taxes that are fixed, such as use tax, registration and inspection fees. Even car insurance premiums can and should be based on usage.
The vast majority of road damage is due to heavy trucks, not personal vehicles. This could be reduced by shifting more freight to rail. It would therefore make sense to increase the taxes on diesel fuel, and use part of the gasoline and diesel taxes to upgrade the rails.
