Repeal the federal gas tax, regardless of oil prices

The sharp increase in oil prices does not bode well for our finances. It’s not just higher gasoline prices. Spikes in oil prices are correlated with recessions. “All but one of the 11 postwar recessions were associated with an increase in the price of oil,” writes economist James Hamilton.

One way to decrease gasoline prices is to suspend, decrease, or eliminate the federal gasoline tax of 18 cents per gallon.  Enacted in 1932 as a temporary deficit reduction measure, it validates Milton Friedman’s maxim: “Nothing is so permanent as a temporary government program.”

A gas tax is proper to the degree that it acts a user fee. The gas tax you pay should go toward maintaining the roads you use, or are likely to use. Boulder drivers shouldn’t be taxed to finance roads in Flagstaff.  But we are. We’re “gas tax losers,” says the Environmental Working Group. Send a gas tax dollar to DC, and the Denver-metro area gets only 86 cents back. But Flagstaff, to pick a “winner” city, gets $2.30 back.

To make matters worse, many gas tax dollars don’t support roads – anywhere. As Transportation Secretary, Mary Peters told PBS that “only about 60 percent of the gas tax money … actually goes into highway and bridge construction.”  A Heritage Foundation study concurs, concluding that “as much as 40 percent of fuel tax revenues” fund costly, inefficient, and underutilized “mass-transit” boondoggles.

Eliminate the federal gas tax so drivers pay to maintain roads they actually use.

This article was printed in the Boulder Daily Camera on March 12, 2011.

http://www.cato.org/multimedia/embed/2898

Thanks to Tad DeHaven for some of my talking points, which I got from his appearance on CNBC’s Streeet Signs. Not only does he make good points, but he handles the snarky comments by Jim Pethokoukis. Pethokoukis has a bit of a fit at the end at the suggestion that government planning inevitably fails.

See also:

Street Smart: Competition, Entrepreneurship, and the Future of Roads


Sell the Streets, by Benjamin Powell

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