Big Oil gets a lot of grief over high gas prices — but what about Big Government?
Motor fuels taxes account for some 22 percent or so of the current per-gallon cost of gasoline in this country. This is arguably both regressive (because it hits people with low and moderate incomes harder than it does the well-heeled) as well as disproportionate — since the amount of tax is very high relative to the actual cost of the item being taxed.
We don’t, for example, stack a tax of 50 cents per quart onto the price tag of milk — because milk is considered a necessity. But how is gasoline less of a necessity? Maybe we don’t drink it — but most people have little choice about using a car to get to work. Public transportation is a realistic option in only a relative handful of major urban areas. And even then, it’s often necessary to drive to the train station (as in the case of the Metro system in Washington, D.C.).
Yet there’s no end to the sticky fingers of the state when it comes to motor fuels taxes — which are layered like a wedding cake. First comes the Feds. They hit you up for 18.4 cents on every gallon of fuel you buy. But that’s just for openers. Next in line is your state government — which will have its hand out for another 20 or so cents per gallon. (The amount varies depending on where you happen to live; some states have considerably higher taxes than others.) Then there are local taxes — which add another few cents to the tab. The total exaction can amount to some 60 cents per gallon in places like California and New York.
Do the math.
If the total price of a gallon of unleaded regular is $2.75 and the tax on that fuel is 60.8 cents per gallon (as in NY), then the tax rate is on the order of 22 percent. If you spend $50 per week on gas, that’s about $572 in taxes you’re paying each year. (On top of federal, state and local income and other taxes.)
This is usurious by any standard. And it’s made all the more obnoxious given the fact that gas is as much a necessity for the average person as groceries. Indeed, most people have no choice but to use their cars (and thus, burn gas) in order to buy groceries.
But no quarter is given — literally. If anything, the politicos typically call for more and higher gas taxes. This is supposed to be an incentive to lower consumption — but if that standard were applied to milk and cheese, there would be a massive public uproar.
And yet, no one really complains. “Big Oil” gets all the grief instead.
Now, this isn’t a defense of (or an apology for) the way oil companies conduct business. Good, bad – or ugly – it’s entirely beside the point. What is worth discussing is how come it’s okay for government to gouge us so ruinously, on a commodity so essential to our day-to-day lives.
These taxes are necessary — or so the argument runs — in order to finance new road construction and to pay for the upkeep of existing roads. The Highway Revenue Act of 1956 created the Highway Trust Fund, into which motor fuels excise taxes are paid; the money collected is then distributed by the Feds to each state to pay for various road/highway projects, etc. (The taxes themselves are actually collected from the large corporations/distributors, etc. selling fuel; the money you pay at the pump “reimburses” them for what they paid the government.)
But this process necessarily involves “administrative costs” — the various bureaucracies (and bureaucrats) who pull the levers, stamp the forms and shuffle the paperwork. It’s hard to put a figure on how much all this costs, but when a federal program is involved that also involves every state (and every county) in the entire United States, you can bet it’s considerable.
Also, motor fuels taxes end up going to pay for things that have nothing to do with building or maintaining roads, such as funding mass transit projects or the Leaking Underground Storage Tank Trust Fund. These may be worthy projects, but it’s a con to let people think they’re paying all these taxes solely in order to fund the roads they’re driving on.
And then there’s the matter of all the political haggling that goes on, under which some states end up getting back less than they paid out. Motorists in, say, Montana end up paying to finance new roads for New Jersey.
Probably, we could get much more bang for our buck — and lower motor fuels taxes — if we switched over to some system of “pay as you go” toll roads. Or at least, cut the federal government out of it entirely.
There would be minimal overhead, and instead of gaming the funds through a multi-tiered political process and bureaucracy, money would be allocated to necessary upkeep and maintenance only. No more sending money to Washington, with Washington then deciding how much it will send back and to whom. No more siphoning funds for projects (make-work or otherwise) that don’t have anything to do with building new roads and keeping the ones already built in good order.
But the current setup is not likely to be altered because there’s next to no outrage. People focus on the supposed machinations of “Big Oil” — and give Big Government a blank check.
It doesn’t make much sense, but that’s the way it is.
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