How To Replace the Gas Tax? How About Nothing?

The Wall Street Journal reports on the debate over the future of the gas tax, which is now consistently failing to raise enough revenue to pay for highway construction and maintenance (an unintended consequence of the government’s drive to boost fuel efficiency).  The options discussed include taxing drivers on the basis of miles driven, the use of toll roads, taxes on cars or oil or indexing the gas tax to inflation.  The most obvious option, to me anyway, is not discussed: pay for highways out of general revenues.

Conrad’s First Principle of Tax Reform is that any tax that serves to hide the cost of government is a Bad Thing.  The gas tax is a near-perfect example of government’s penchant for cost hiding and cost dispersion (discussed in an earlier post here).  It is rationalized as a “user fee” that imposes the cost of a government provided benefit on the people who use it.

Forgive me for finding this to be more pretext than principle.  The government’s use of user fees is highly selective.  In general user fees are applied where private companies (e.g., gas stations, telephone companies, airlines, etc.) can be dragooned into acting as tax collectors from customers putatively using some government provided benefit.  A sound rule of thumb is that if it’s not defense spending or transfer payments, the government will be looking for innovative ways to charge taxpayers for the core functions of government.  That is, what taxpayers think of as the services the government should provide from the income taxes the taxpayers pay, the government thinks of as an extra benefit the people can be nickel and dimed for through charges above and beyond income taxes.

The article gives the game away in three places.  First, it acknowledges that Congress could just raise the gas tax, but that doing so is politically unpopular so a “more comprehensive fix” is needed.  Second, it notes that a drawback to charging drivers for miles driven is that they would be “hit with a large tax bill” once a year.  And third, it notes that assessing drivers individual taxes is expensive and complicated – a possible solution is to have a third party such as a wireless provider collect the tax as part of a data plan.

In short, the article is not really about crafting optimum tax and transportation policy – it’s actually about how best to hide the cost of government from taxpayers.  I can understand why big government liberals are eager to engage in such an exercise.  I cannot understand why small government conservatives should play any part in it.

About Conrad

Conrad O'Connor is the nom de web of a tax lawyer working in Atlanta, Georgia.
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