Currently the U.S. federal government spends $78 million a year to keep the national highway system in working order, but only receives $34 million in revenue from the gasoline tax. This disparity is only going to increase if we leave our current system in place, as vehicular efficiency continues to rise and EVs start satisfying an increasing portion of our transportation. While many of us here at CleanTechnica would probably argue more efficient transportation and a lowered dependency on oil is a good thing, I think most would also agree we need to maintain tax revenue in order to keep our transportation sector in working order, and hopefully even improve it.
To this end, congress is currently considering passing legislation to tax car mileage. For the moment, let us completely overlook the difficulty in enforcing this tax, along with its incredibly invasive nature, and look at tax systems as a whole.
From a societal perspective, the best tax systems are used as incentives to discourage behavior that has impacts which society has deemed as “negative.” Whether people realize it or not, this was the foundation of one of the most well-known taxes in existence: the sales tax. The sales tax is a tax on consumption, and while the behavior of buying goods is not necessarily negative, those who consume more of society’s resources place more of a demand on society and, therefore, pay more taxes to help keep society running. This is a very successful tax and has been adopted in fifty states and is the same principle behind the excise tax levied on gasoline and diesel fuel.
So, what went wrong with the excise tax on gasoline and diesel? Inflation. The law for the gas tax stipulates a tax of between 26 and 81 cents per gallon depending on local governments, and currently does not increase with inflation. With the American pastime of driving, and our incredible distaste for paying taxes, legislation to increase the gas tax became untouchable. No lawmakers dared to increase such a noticeable tax! While the federal government did correct some of the disparity in 1993, and some states have attempted to update their local gas tax, none have come close to keeping the revenue in line with the cost of transportation maintenance.
Which brings us to this new tax on mileage. While this tax may seem logical at first, at its core, this tax has a fundamental flaw. While it does tax the “negative” behavior of driving, which consumes resources and produces pollutants, it does so ambiguously! This concept does not distinguish between the person who drove 13,000 miles in their Land Rover LR4 last year and consumed over 850 gallons of fuel and the Chevy Volt owner who also drove 13,000 miles last year and only filled up his 9.3 gallon tank 4 times. Because of this, the proposed law ends up targeting the behavior itself and not the negative externalities associated with it.
So, what is this article doing on CleanTechnica? As that last example illustrated, using this mileage tax would remove much of the economic incentive to driving a fuel-efficient vehicle, making it even more difficult for hybrids and EVs to gain market penetration. On the flip side, however, we could write tax policies that collect from those using most of our natural resources, policies that account for the externalities produced by consuming oil-based fuels, and policies that encourage a more sustainable lifestyle through encouraging efficiency and alternative fuel vehicles.
But, then again, policies like these might promote a more efficient, self-sustainable America. Who would want that?
Zach is an Electrical Engineer with a keen interest in the Natural Sciences and Advanced Technologies.