Taxes… oh how we all hate taxes! Our paychecks are taxed, our groceries are taxed, our telephones are taxed, even our cable TV is taxed. If you were to lump all the taxes you pay in a year into a single sum, in 2014 would have paid 100% of your income earned from January 1st through April 21st (111 days) to cover your “annual debt”. We call that “Tax Freedom Day” and it’s getting further and further into the year.
If we simplify things down, there are two primary types of taxes. Tax on what we spend, and tax on what we earn. (Yes, there are others, but we’re trying to keep this simple.)
Taxes on what we spend are often referred to as “usage taxes” and, as the name implies, the more one uses, the more taxes one is required to pay.
Unless you have a well, your municipality probably provides you with water – for a fee. Unless you have a septic system, your municipality probably provided you with sewer service – for a fee. The more water you use, the higher your fee is. That makes sense, right?
Let’s switch over to fuel tax, or taxes on the gas that you put in your car. Where I live, you pay 24.5 cents to the State of Utah for every gallon of gasoline or diesel you buy. You also pay an additional 18.4 cents per gallon of gasoline, or 24.4 cents per gallon of diesel to the Federal government.
- $0.429/gal for gasoline
- $0.489/gal for diesel
Compare that to the price per gallon and it’s clear to see that a fairly large percentage goes to the Governments for taxes.
The heavier your vehicle is, the more gasoline you have to use to power it. The more gasoline you use, the more taxes you have to pay. Since these vehicles put more wear and tear on the roads, the additional tax revenue makes sense.
If you use a lightweight vehicle, you get better gas mileage than heavier vehicles, and therefore purchase less gasoline per mile. Since your vehicle puts less wear and tear on the roads, paying less taxes than a heavier vehicle also makes sense.
In both cases, the more miles you drive your vehicle, the more gasoline you have to buy, and the more taxes you have to fork over to the Governments.
Alternate Fuel Vehicles
My wife and I both drive hybrid vehicles. This cuts our fuel consumption almost in half – it also cuts our gas taxes by the same proportion. Hybrids are usually lighter weight than their non-hybrid counterparts, and don’t pollute as much from the tailpipe, brake pads, and tires (bet you didn’t even consider pollution from brake pads and tires, did ya?).
Natural Gas (CNG) vehicles are very popular. They get about 10% less miles per gallon than the same vehicle powered by natural gas, but CNG costs significantly less per gallon. It’s also taxes less, with Utah only charging $0.085/gallon.
Electric vehicles can plug into your home’s power outlets, dodging the gas tax altogether. Of course you’re still charged energy taxes, so this line is kind of blurry.
Doesn’t Cover Everything
Even with as much taxes as are currently being charged at the pump, it doesn’t cover everything. Both State and Federal Governments have to pull taxes in from other sources to pay for roads. This shouldn’t happen under a true usage tax situation. There, usage taxes should pay for everything under their umbrella.
To account for this gap, the Utah Legislature is considering how best to address the situation. Of course, being a Taxing Entity, it first jumps to “raise taxes”, because we all know that throwing more money at a problem is the best way to solve the problem. (Hopefully you caught my sarcasm in that last statement.)
However, since more of us are turning to CNG, hybrids, electric vehicles, and even more “exotic” alternatives like vegetable oil and biodiesel, collecting taxes per gallon is becoming less viable.
Ironically, one of the problems the governments were trying to solve (reducing pollution) is actually working! People don’t want to pay as little taxes as possible, and are doing a decent job finding ways to reduce their tax-footprint. Fuel efficiencies are improving, pollution is decreasing, and alternate fuels are becoming more realistic with every passing day!
To make up for reduced gallons being sold, Utah (and others) are looking at ways to get away from (or add to?) the tax per gallon, and instead charge a tax per mile. We already pay taxes each year when we register our vehicles. These taxes get lower every year (until they hit a certain level). Would the DMV simply look at our odometers and charge us a tax (they’d call it a “fee”) based on how much we drove versus what the number was the previous year?
If so, what about that road trip you took to Florida last year? You’ll be charged taxes in Utah for using the roads in other states. Currently, the gasoline you buy along the way is paid to those states, as it should be.
Along I-15 in Utah you might see the HOV lane. That’s really a lie. It’s not a “high occupancy vehicle” lane. You can drive in it if your 7-seat minivan only has two occupants. Or, if you want to pay a toll, you can get a special chip that you mount in your car. Every time you pass under a toll-reader it deducts money from your account. Or, like me, if you have a hybrid (or CNG) vehicle, you can get another special chip that you stick to your windshield. Every time you pass under a toll-reader, it knows who you are.
The latter two are concerning. Since the State knows the locations of these readers, it also knows the distance between them, and when you passed under each of them. With these two bits of data they can calculate your speed and could (in theory) automatically issue you a citation for speeding or perhaps even for impeding traffic (a catch 22 that sounds a lot like entrapment, but probably wouldn’t be seen that way in court).
Add to this the fact that the State can track where you are, and privacy becomes a real concern. Pundits will argue that this “won’t happen” or “they wouldn’t do that”. They’ll be quick to state that these readers only exist on a small portion of the I-15 corridor, and even then only in one lane. What they won’t say is that they could easily be added to traffic signals – the same ones that have cameras mounted on them already. This could be the “magic bullet” to taxing by the mile.
Of course, no one will want to talk about how much money buying, installing, and maintaining all those new pieces of hardware is going to cost. Instead they’ll focus on the “couple dollars” that the stickers cost. They’ll probably even say the sticker will cost less than the amount of taxes you already pay on a full tank of gas.
They’ll argue how it’s more “fair” because those that use the roads more should pay their “fair share”. They won’t tell you that all the trucks that use the roads will be charged even more than they already are, the same trucks that deliver goods to the grocery store or packages to your doorstep, and that those companies will have to raise the prices on things that you buy.
Instead, we should be looking at how we can eliminate the Federal gas tax. Since the vast majority of use from a gallon of gas is used in the state in which it’s purchased, the states should collect all the taxes, and use them efficiently inside their borders. No, projects like “the bridge to nowhere” wouldn’t have Federal monies to be funded – but isn’t that a good thing?