The Case for Higher Gas Taxes

The national average gas price has been steadily declining since mid-September. A discussion of why gas prices rise and fall is beyond the scope of this post, but a good overview can be found on Robert Rapier's R-Squared blog.

Rather, I want to focus on the opportunity (yes, I said opportunity) presented by this decline in the price of gas. In many states, the tax on fuel has not been increased in many years. Considering inflation, therefore, state gas taxes are generally declining. This represents an enormous amount of potential revenue that can be applied to fund transportation improvements.

Proposing to increase the cost of gasoline is dangerous politically. So why not introduce gas tax increases that are tied to decreases in the cost of gasoline? When the non-tax price begins to increase, the tax rate can remain unchanged. Increases in the overall cost of gasoline may thereby be more gradual. Over time, yes, the cost of gasoline will increase. But this is a pill (or a vegetable, if you prefer to look at it that way) that will provide the necessary medicine (or nutrients) to improve our land use and transportation systems.

State Gas Tax Rates as of January 1, 2012
(Exclude Federal Tax Rate of 18.4 cents per gallon)

More gradual changes will allow for people to adapt by choosing more efficient vehicles, living closer to work, etc. Cities will have an easier time encouraging smarter development, lower parking requirements, and more viable transit systems, which may help straining municipal budgets.

Was there a time for cheap gasoline, when it fueled rapid growth in national GDP? Perhaps. But now is the time to reconsider our relationship with gasoline. Prices will increase overall anyway. Why not keep more of that increase to invest in our own infrastructures rather than to pay for imports.