Daniel Hemel: 'Don’t Mess with Gas Taxes'

Don’t Mess with Gas Taxes

Four East Coast states — Connecticut, Delaware, New Hampshire, and Pennsylvania — are considering a proposal to replace their gas taxes with “mileage-based user fees.” Oregon is already experimenting with a version of this approach. This strikes me as a terrible idea.

Gas taxes generate incentives for motorists to drive more fuel-efficient vehicles. In Pennsylvania, where the state fuel tax is 50.5 cents per gallon, the driver of a new Toyota Tundra (15 miles per gallon) pays a state gas tax of approximately 3.4 cents per mile, while the driver of a new Toyota Prius Eco (56 miles per gallon) pays a state gas tax of approximately 0.9 cents per mile. Buy a more fuel efficient vehicle, save on gas taxes (and, of course, on gas). Mileage-based user fees wipe away this incentive — the Tundra driver and the Prius driver pay the same amount per mile.

Not only are mileage-based user fees less eco-friendly than gas taxes, but they are also harder to enforce. There are somewhere around 115,000 gas stationsin the United States and more than 210 million motorists. That means it’s a lot easier to monitor compliance at the gas stations than to keep track of miles travelled by all drivers on the road. Moreover, states generally collect gas taxes “at the rack” (when the gas is removed from a bulk terminal) or at the bulk distributor level, so it’s not necessary even to monitor individual stations. Which isn’t to say that compliance is perfect, but mileage-based user fees would create a whole new set of compliance complications.

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