At varying points in the last few years it’s been made clear that we’re running out of money for our roads and it isn’t clear how we’re going to make up for this funding shortfall. You see, most of the funding for our roads is paid for in the taxes charged on gasoline. But the tax is a flat amount (18.4 cents/gallon) at the federal level and hasn’t changed since 1993. Because the tax is flat instead of a percentage, the rise and fall of fuel prices don’t affect the tax revenue directly. Consumption of fuel would of course.

But without the ability to collect more taxes just to adjust for even inflation, we’ve run out of money to service our roads. Enter our new low cost gas:

fuel prices

As Americans, we don’t see this as freeing up extra cash to strengthen our own household budgets. It’s an excuse to drive more and buy less fuel efficient cars.

One of the ways to ensure more fuel efficient decisions would be to reduce the demand for gas. How do you do that? Raise the gas tax of course. North Carolina has an awkward way of raising their gas tax, but when prices fall, taxes follow suit. People in New Jersey think their roads are fine, and oppose a gas tax increase. It’s not that politicians aren’t talking about it. But as CBS put it:

Sen. John Thune, R-S.D., recently criticized President Obama for not raising the gas tax. “I always thought that was ironic, that he’s willing to raise every other tax,” Thune told The Rapid City Journal last month. “And then the one that actually pays for something you can see a direct benefit from, he doesn’t want to talk about it.”
The prospect of higher gas taxes haven’t moved into the nationwide conversation yet, however, and it’s unclear if that will ever happen. While more lawmakers are starting to discuss the idea, many still say the subject resides firmly on the third rail of the nation’s politics.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette, a former Republican congressman and a close friend of Speaker John Boehner, told The Atlantic. “I see no political will to get this done.”

We’re unlikely to see any changes in how we tax driving, which is a shame because economically it’s one of the easiest levers to pull.

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categories: economics, environment, government