- The gas tax is not a user fee: Not only are taxes “based on fuel sales, not mileage driven,” but “most of the money that is spent on local roads and streets—which account for the majority of public road lane-miles and about 13 percent of vehicle travel—comes … from other taxes, often local property taxes.”
- Gas taxes are levied in lieu of sales taxes in most states: “Had New Jersey, for example, charged its 7 percent state sales tax on motor gasoline purchases in June 2010, it would have generated approximately 15.4
cents per gallon in general revenue for the state, compared to the 14.5 cents per gallon the state actually took in through its gasoline tax. … If gas prices continue to rise faster than inflation while gas taxes lag behind inflation, then this net tax subsidy for gasoline will become more common.”
- The federal gas tax was created to plug a general fund deficit, not for the construction of the Interstate Highway System: Only from 1956 to 1972 was the tax dedicated to highway expenditures. “The last two major increases in the federal gasoline tax—in 1990 and 1993—were dedicated in whole or in part toward deficit reduction, the original purpose of the federal gasoline tax when it was adopted in 1932.”
- Roads need subsidies: “Since 1947, America’s spending on highways at all levels (federal, state and local) has exceeded the amount of money collected in gasoline and vehicle taxes and tolls by more than $600 billion
(2005 dollars).” “In 2008, local governments spent more than $31 billion on highways raised from property taxes, assessments, and general fund revenues.” I’m surprised the figure is that low, since in 2010 Minneapolis spent more than$16m on roads through bonding, property taxes and assessments.
- Driving incurs tremendous external costs: “A 2009 study by the Victoria Transport Policy Institute (VTPI) estimates that 35 percent of the cost of driving consists of external costs. VTPI estimates that the full cost of a mile of driving—including fuel, ownership and external costs—ranges from 94 cents per vehicle mile for rural driving to as much as $1.64 per mile for urban rush hour driving. Another 2007 study, by researchers at Resources for the Future, estimated that the external costs imposed by driving amounted to approximately $2.10 per gallon.”
- Interstates largely serve local traffic: “Two out of every three vehicle-miles traveled on the Interstate system are on urban Interstates, which presumably serve local or metropolitan mobility needs—just as do transit systems.”
- Dedication of state gas taxes to roads limits the funding of transit capital projects: “While transit projects technically can receive an 80 percent federal match, in practice the match is typically around 50 percent, since the New Starts process favors application in which state and local governments provide a greater share of the funds. In many states, finding those local funds is extremely difficult since gasoline tax revenue is off-limits for transit projects.”
One of the safest predictions about the upcoming MN legislative session is that someone will propose to extend the sales tax to a wider variety of goods. It is also safe to say that gasoline won’t be included in that list of goods.