February 28, 2006

Gas Tax: Equity & Adequacy

Here's an interesting article out of today's New York Times about raising the national gas tax. The core findings of the article are from a poll taken by the New York Times and CBS:
Americans are overwhelmingly opposed to a higher federal gasoline tax, but a significant number would go along with an increase if it reduced global warming or made the United States less dependent on foreign oil, according to the latest New York Times/CBS News poll.
There are two factors that need to be considered when proposing a change to a gas tax: equity and long-term adequacy. Equity because gas taxes are regressive and adequacy because gas tax revenue tends to be a declining revenue source over time. The article does a good job of highlighting the equity aspect:
Because increasing the gas tax is regressive, falling hardest on those who can least afford it, Mr. Borenstein would offset the bite by lowering income taxes in a way that would "make most middle and lower income people better off." But they would end up driving less because of the rising cost of gasoline, some economists believe. By Mr. Borenstein's calculation, a 10 percent increase in the price of gasoline reduces consumption by 6 to 8 percent "over the long run."
However, the article doesn't go into the long-term adequacy of funding specific programs or projects with a declining revenue source like the gas tax. It's important for lawmakers and the public to understand that overtime, gas tax revenue is more than likely to decline overall and that policy decisions need to be made in light of that.


At 11:44 AM, Blogger josh narins said...

Reduce oil industry tax expenditures.

The economic effects on gas prices, the gov't market disincentives to move to other fuels, all that type of stuff is the same.

However it seems more politically salable and even simplifies the tax code.


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