Gas Tax ironies

Last week the state House of Representatives voted to increase the state's gas tax, through a phased-in 4 percent increase over a two-year period. If approved by the state Senate and signed into law by the Governor - who has indicated his support for the measure - motorists can expect to see a roughly 7 cent increase by next year.

The increase is needed because substantially less gasoline is being sold than previously, as fuel efficient cars, and perhaps to some extent the economic slowdown that began in 2008, tempered fuel consumption. The state uses revenue from the tax on gasoline to maintain roads and bridges and to help finance the state's Transportation Fund. As fuel efficiency advances, there's less gas being sold, and less revenue going to the state. Nevertheless, the amount of wear and tear on the roads continues apace.

Ironies abound. For years we've been told that curbing fuel consumption would be a good thing. Less carbon dioxide emitted into the air. Less pressure on the nation's oil import bill. Now that this message has begun to take hold, we have a new problem.

The other irony lies in the fact that in many ways, a gas tax is pretty close to a well-targeted tax. It imposes a cost on those who impose the wear and tear on the state's roads in perfect proportion to the amount of driving an individual motorist does. While some will no doubt argue it is also an unprogressive form of tax in that it hits the affluent and the not-so-affluent equally, so does any form of a sales tax, and yet the state has relied on sales taxes of one form or another for years. The money has to come from somewhere, and that's been considered a reasonable way to gather it.

Not raising the gas tax, despite the pain it will cause, was unfortunately not an option at this time for lawmakers. The state needed to come up with a certain amount of money to qualify for matching federal dollars. Almost $60 million in federal funds was at stake, too much to cavalierly walk away from. At least the House lawmakers avoided endorsing one measure that would have been truly idiotic - a surcharge tax on sales of electric cars. The logic there is that such vehicles still impose the same wear and tear as their gas powered brethren, yet consume much, much less gasoline (in the hybrid versions). Even less money, then, to patch up all those roads and repair the bridges.

It's hard to imagine a more wrong-headed solution, even if meant only as a partial one, than that. A more contradictory message to entreaties to conserve fuel and protect the environment is hard to imagine.

Looking forward, it's clear that reliance on the gas tax as a means of financing the Transportation Fund and paying for road repairs is not going to work. Another way will have to be found.

Possible solutions include charging motorists by the amount of miles they drive, measured when they bring cars in for the annual inspection. The downside there is that this shifts the burden almost totally to in-state residents. Undoubtedly, there's also a technological solution whereby a computer tracks mileage and sends you a bill, "Big Brother" style. There must be a better way than that.

No one likes increasing taxes, but this time, there really wasn't much else that could be done in the short term. But now is the time to begin to figure out how the state's transportation infrastructure needs will be taken care of as we continue to use less gasoline. Not so long ago, that would have been considered a nice problem to have. But much like a proposed moratorium on wind development illustrates, it's turning out that the politics of renewables are complex, and not an immediate "win-win."

The gas tax was only a part of the flurry of activity in the Statehouse last week around raising revenue, once the lawmakers effectively turned a cold-shoulder to some of the Governor's other financing ideas. A tax on so-called "break open" tickets, or divvying up the state earned income tax credit, for example were rejected; you could call them "out of the box" thinking or hair-brained. We lean towards the latter, and would like to suggest that the state focus on two things when it comes to taxing and spending - take a hard look first at what it is spending, and reflect on whether every appropriation or program is necessary, and second, take a comprehensive review of the state's tax code.

We'd agree with Rep. Cynthia Browning that a good place to start is a review of all the exemptions, carve-outs and other "tax expenditures" that pepper the tax code. While we like Gov. Shumlin's stance on not raising "broad based taxes" like those on sales or income, a smarter approach would be to see if all those exemptions are still serving the purpose originally intended, or if they were stripped away altogether and replaced by a lower overall tax rate, would the state be better off financially and the tax code simpler, cleaner and fairer?

Our guess is the answer is that is a resounding yes.

One last thought on this taxing subject. Lawmakers wisely rejected a poorly thought out proposal that would have raised taxes on soda via the front end, where the tax would have fallen on distributors, not consumers; at least, not directly. A more elegant solution, although one likely to be unpopular with fans of soda and other sugary drinks, removes a sales tax exemption on those beverages and candy. If you want to target obesity and sugar intake, that's a better approach than making the distributor pay, and shifting the cost of the new tax across a multitude of products besides soda and candy.

There's no free lunch. The more government Vermonters want, the more we should expect to pay for it.


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