Monday, April 7, 2008

Gas Tax Sanity

UPDATED: I got a lot of math wrong. I fixed it.

I missed this very smart call for a higher gas tax from the Globe Magazine a month ago. Writer Phil Primack hits all the high points:

  1. The $0.21 gas tax hasn't been raised since 1991, eroding it's value to $0.14 in 1991 dollars

  2. Those who reap the benefits of our transportation infrastructure should pay for its upkeep.

  3. Even a significant hike would not put us out-of-line with neighboring states, maybe not even making ours the highest.

Yup, yup, and yup.

I'd add another point. While the gas tax has failed to keep up with inflation, it's done an even more woeful job keeping up with the cost of gas. In 1991, the average price for a gallon of gas appears to have been about $1.10. (I can't find a more authoritative reference.) A 15-cent 21-cent per gallon levy translates to an effective 13.6% 28% state tax: .21 Mass. gas tax/($1.10 - .21 Mass. gas tax - .141 federal gas tax). In February, the price of a gallon of regular was $2.989. If the effective, proportional rate were the same as in 1991, we'd be paying 40 cents 73 cents a gallon in tax: .28 x (2.989 - .21 Mass gas tax - .184 federal gas tax).

The current gas tax pulls in $600 million per year. Raising it to 40 cents 73 cents would reap an additional $629 million $1.77 billion per year (at $34 million in revenue per cent of gas tax). Think that wouldn't help ease the difficulties we're having paying to maintain our transportation infrastructure?

This isn't just a mathematical game to bolster the argument for a higher gas tax. The cost of maintaining our transportation infrastructure is closely tied to the cost of gas. Revenue from the gas tax ought to rise proportionally with the price of gas.

Instead of a gas tax, we're likely to have a super-regressive cigarette tax.

3 comments:

khs said...

While you're at it it, the gas tax should be changed to a percentage of the retail price, not a constant. Would that we had done that 10 years ago... You could make that change revenue-neutral today if necessary, and still benefit from it over time.

Steve Runge said...

It was a little depressing today to hear a state rep say on the radio that an increase in the cigarette tax would decrease income from lottery tickets.

At what kind of "no new taxes" insanity have we arrived when the only proposals on the table are increases on cigarettes vs. lottery tickets?

I like the proposal I heard (was it here?) about progressive tolls based on vehicle weight: make Escalades & their cousins pay more for using highways.

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