Let’s Modernize the Gas Tax!

August 30, 2012 by
Filed under: Car Stop 

This column and The American Conservative Center for Public Transportation have longed promoted increasing the tax on gasoline. Yes, that can be a conservative position, so long as such an increase is balanced by cuts in other taxes, preferably the income tax. As a member of the National Surface Transportation Commission, Paul Weyrich voted for an increase in the gas tax.

But we have gone past that position to promote a particular kind of gas tax, one that would vary according to the market price of gasoline. The goal would be to create a stable, predictable gas price that would rise slowly over time. Adjustments in the tax could not always cover market fluctuations, but they could do so much of the time. If consumers could know what future gas prices would be, they could take that into account when buying a car.

Now, it appears we found an ally in an unlikely place: car dealers! A piece in the NationalJournal.com (“$1 Gas Tax? One Auto Dealer Says, ‘Yes, Please,’ “) dated August 9, 2012, quotes the owner of an automobile dealership in LA, Mr. Peter Hoffman, as saying, “A lot of our industry has been saying, ‘Put a progressively increasing price on gasoline.’ “

Mr. Hoffman’s reasoning is the same as ours, with the difference that he is looking at it from the standpoint of a car salesman and our perspective is that of car buyers. Both need the same thing: predictability. The National Journal says, “What Hoffman wants most . . . is market certainty – – the ability to plan.”

Car dealers are caught in a whipsaw of fluctuating gas prices. When prices rise, people want small cars that get good gas mileage. So car dealers order lots of them. But then the price of fuel drops and the small cars sit unsold as customers demand SUVs. The dealer orders SUVs but then the price of gas soars again and they don’t sell. He can’t win.

The National Journal says Hoffman and this Center are not alone:

Hoffman is one of a growing number of car dealers who advocate the same solution to the problem: raise the gas tax, enough to create consistent, predictable demand for fuel-efficient cars . . . One way to do this, says automakers, would be to create a new gasoline price floor – – a point below which prices won’t fall.
“it allows the population to plan. It allows automakers to plan. It allows us to plan, “ Hoffman says.

Now all we need are some politicians with the guts to go forward with the idea. How about you, Rep. Ryan?


9 Responses to “Let’s Modernize the Gas Tax!”

  1. Tom says:

    Well, it’s not just one car dealership in California. The article mentioned that the CEO of AutoNation is also in favor of a higher gas tax. AutoNation is the nation’s largest auto retail chain. Imagine if the CEO of Wal-Mart were advocating higher sales taxes!

    Car dealers live and die by inventory. Not only do they have to finance their working capital, but the car depreciates as it sits on the lot, waiting to be sold. That’s why the dealers have end-of-summer sales, why they’re willing to do Internet sales, why they’re willing to go down so much on price if you bargain hard.

    It’s better for them to get the car off the lot *today* and take a 2% profit, rather than have it sitting on the lot, waiting for a smooth-talking salesman to wring a 10% profit out of a walk-in customer.

    The only people who should like low gas taxes are the oil states, and the oil companies. The American consumer may *think* he wants low gas taxes, but that’s only because he’s fooled by the sticker price, and can’t think through the negative externalities.

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  3. tz says:

    Socialism had perfectly predictable politburo set prices.

    The crony capitalists will simply increase the retail price so they can capture the revenue as profits – if gas is $5/gal retail regardless of whether it is $3 or $4.95 wholesale basis tax, why not line your pockets instead of uncle sams?

    Any tax to control behavior – beyond compensating for economic externalities is tyranny, corruption, or both.

    Lind himself has noted 4th gen warfare. How is the State to be more legitimate with arbitrary taxation which enriches cronies, be it TARP and goldman sachs, or a gas tax for exxon?

    We don’t even prosecute thefts like Corzine’s MF Global, so futures markets are broken, but that would be how to mitigate small/large cars. Buy calls on oil when SUVs are selling.

  4. John says:

    Conservatives do not like subsidies. The federal gas tax is really a user fee, we pay to build and maintain federal highways and bridges. It has remained unchanged since 1993. Today it only covers about 42% of the cost of maintaining these roads and bridges; hence we have pot holes, more traffic and tragic bridge collapses. Transfers from the general fund have subsidized the 58% shortfall. Presently the rate is about 18.3/gal; the rate would have to increase to .436/gal just to cover the shortfall today.

    However, people are driving less and higher gov’t mpg standards will soon result in a new shortfall. In addition a per gallon assessment punishes older lower mpg vehicle owners (generally the poor) and rewards those with hybrids and electric vehicles (generally the wealthy). I recommend that we move to a per mile driven assessment. This would be proportional to use and should have no correlation with ones economic class. I believe you would file your odometer reading when paying you annual vehicle registration fees/tax. We would pay later after receiving our bill. High mileage users could pay quarterly. Truckers monthly. The Random field audits would verify. Those, whose odometer broke would pay an estimated assessment and a receive a “fix-it” ticket to get repaired.

    This change would drive more travelers to use public transportation. I would go further: Remove the requirement the private freight railroads pay property taxes on their R/W & station properties so long as they offer regularly scheduled passenger service over those tracks. Then privatize the airports. The air traffic controllers would become a non profit association, with the military being one “shareholder/user”, albeit a major one. The eliminate the FAA and privatize the TSA. If passengers don’t trust Airline A, they’ll fly on Airline B; ensuring passenger safety will align their interests with that of their passengers.

    Do all this, and then government will no longer need to subsidize Amtrak; and probably Amtrak will no longer to operate over most the country, as the freight railroads will be back in the passenger business, as they should be.

    In closing why do we use the word “subsidy” when we refer to Amtrak, and the word “invest” when we refer to spending on roads, bridges, airports and runways? There is no difference, aside from ascetics.

  5. This is an excellent idea, I think. Markets hate uncertainty. But right now any legislator that proposes it can expect to be eviscerated by the other side.

  6. Claude says:

    A popular reaction will be complaints over the government sticking it’s already over-long nose into my business. Most people don’t particularly want the government asking how far I’ve driven.
    There’s also the problem of taking the tax out at the end of the year in one lump sum. How much total gas tax did you pay last year and could you cover it all at once when you renew your registration? For the poorer drivers the answer will be no, and they’ll give up driving if they can, leading to lower revenues.

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  8. Claude says:

    I have to disagree with John. The gas tax is not a user fee, it’s an excise tax. You can use the federal highway system without buying gas if you drive an electric car or ride a bicycle on the shoulder. (yes, that’s legal on local highways and rural interstates.)
    On the other hand you pay the same tax on every gallon even if you only drive on surface streets and never touch the federal highway system or if you buy the gas for your leaf blower or lawn mower. The payment of the tax is only peripherally connected to driving on the federal highway system.
    This is a dedicated tax that allows homeowners and local drivers to subsidize other drivers who use the highways.
    I have no problem with government subsidizing transportation and other economic infrastructure. Public safety and infrastructure are core government duties.
    I like the idea of exempting railroads from property taxes.

  9. Richard Gadsden says:

    A well-designed gas tax would also stabilise prices geographically, so gas stations in isolated areas aren’t forced to charge high rates by the transportation cost of getting the gas to the station.

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