Everybody's Favorite Tax


Congressmen are for it. Editorial writers (even the usually sensible people at The Economist) are for it. A growing number of corporate leaders are for it.

"It" is a hefty increase in the federal tax on gasoline—as much as 25 to 50 cents—to bail out our spendthrift government and reduce the deficit. Every one-cent increase in the gasoline tax, they tell us, will bring in a billion dollars in new federal revenue. What a painless way to put the government's house in order!

And now it's even being portrayed as virtuous. A recent editorial in Science advocated a hiked gas tax as a new form of "sin tax"—you know, like the taxes on alcohol and cigarettes. (We all know that driving cars is bad for us: it uses up irreplaceable fossil fuel and causes the greenhouse effect. And certainly anyone who drives a Cadillac instead of a socially conscious Volvo or Volkswagen has got to be something of a sinner!)

There are many reasons why raising the gasoline tax is a bad idea. It would fall most heavily on those with low incomes, for whom car expenses are a much bigger portion of their budgets. (Fact: those who make less than $10,000 a year pay 9.9 percent of all fuel taxes while those earning over $200,000 pay only 1.4 percent. Even a five-cent hike would wipe out the savings of low-income people from the Tax Reform Act of 1986.)

And higher gasoline taxes would hit westerners, with our long driving distances, much harder than New Yorkers and Washingtonians. (Does that make you wonder just a tiny bit?)

But the most important problem is that using gasoline tax monies to bail out the government would demolish the user-pays principle that has long been part and parcel of gasoline taxes in this country. Federal (and most state) gas tax revenues go into trust funds that can be spent only on transportation (and mostly on roads).

Admittedly, the gasoline tax is not a market price for using the highways. It does not limit demand (thereby controlling congestion) the way true pricing would. And it does not direct investment to those roads with the highest demand, since the monies are allocated politically. But at least the money that you pay in gasoline taxes is mostly spent on transportation—by law. It is not dumped into the general fund, to be pissed away on whatever new scheme the politicos have dreamed up this year.

But that is precisely what today's proponents of gasoline-tax-for-deficit-reduction would do. They're declaring open season on motorists. No longer would you get what you pay for when you gas up. You'll be handing the politicians a blank check, instead of a payment for services you need.

Ironically, this push to bust the highway trust funds comes precisely when study after study has documented significant shortfalls in highway revenue compared with needs. The National Council on Public Works Improvement estimates that governments are forgoing $45 billion a year in maintenance, repair, and needed new construction. And if Congress opens the spigot, siphoning off these "user tax" revenues for unrelated purposes, this shortfall will only worsen.

Had our highways and freeways been funded by tolls, and owned and operated by private companies, this impending crisis would not be upon us. The gasoline tax was always a Faustian bargain, dependent on the good faith of politicians to keep their hands out of the till.

That good faith is about to be breached, with a vengeance. Mark my words: once Congress gets its hands on our "user-tax" monies, you can kiss good-bye any major new investments in highway infrastructure…at least by the public sector.

It may be that in breaking faith with motorists, Congress will inadvertently usher in a new era of private toll roads. Europe has had them for decades, with the Channel Tunnel the latest and most dramatic example. It would be ironic if a major shift toward more responsible infrastructure resulted from the actions of an irresponsible 101st Congress.