A Replacement for Gasoline Taxes...

There has been some debate, not just in Utah, but in other state about gas taxes.  If you drive a hybrid or an electric car, then you don't pay as much fuel taxes as other drivers.  And when gas prices spike, vehicle usage goes down.  Fuel tax revenue goes down.  But highways, roads and bridges need to be built and maintained and the work can not be outsourced to India.

In my opinion, the time has come to do away with fuel taxes and replace them with another stream of revenue.  This is the first time this debate has hit the Beehive State, but in other states, it has been an issue for many years.

In 2009, as cited by a New York Times article, Secretary of Transportation, Ray LaHood suggested charging vehicles by the mile.  However, this would require a device that would track the miles a vehicle is driven.  That is a little to "Big Brother" for this blogger.  Although such a device could be voluntary to those who do not find this invasion of privacy too creepy.  Any other way suggested by the article is complicated and messy.

Therefore, I suggest a simple alternative.  Today, the average vehicle gets about 20 miles to the gallon is is driven around 12000 miles per year.  This means that the average vehicle will burn 600 gallons of fuel per year.  The Federal Gas Tax is 18.4 cents per gallon.  This means that the Federal Government gets around 110 dollars per vehicle in gas taxes.  In Utah, the gas tax is a little higher than the Federal rate at 24.5 cents per gallon, or about 147 dollars of gas tax per vehicle.

If the Federal Government were to do away with fuel taxes and charge every vehicle with a $110 additional tax, it would generate about 27.5 billion in revenue per year.  Of course, that is about 10 billion short of current revenues, but the 27.5 billion is only from passenger vehicles.  The Federal Government does not report the percentage of fuel taxes by source, private or commercial, just total revenue.  There are about 90 million commercial vehicles on the road, and charging them 150 dollars per until per unit would generate another 13.5 billion in revenue per year.  That is over 40 billion in revenue, which is more the 37 billion generated today.

Now, the problem comes in collecting the tax.  My suggestion is that at the individual level, an extra 10 dollars per month be withheld from a person's paycheck and reconciled on the tax return.  Problem solved.

In Utah, it would not be a problem to eliminate the tax on fuel completely and add an extra 147 dollars to vehicle registration fees.   But that may be a little steep for some people, therefore payroll withholding seems to be the answer here as well, but it would be slightly higher.  An extra 15 dollars per month.  And it would also be reconciled on the state tax return.  Problem solved.

Most families, with two wage earners and two vehicles, would see a slightly larger refund at tax time.  About another 10 dollars.  Those without a vehicle would see all of this money come back to them.  Those with more vehicles than wage earners would be the ones hurt by this change.

The reason to push for this?  How to we pay for Police and Fire protection?  In income taxes, that's how.  Why not pay for our highways in the same manner.

Now I have also noticed that the majority of commercial vehicles are using our highways are from out of state.  Therefore, the fuel taxes on diesel fuel will need to remain.  But, those of you who own diesels should keep your receipts because you could file for a refund on the excess tax as well.

And one last question: what about tourists?  Well, if tourists who visit our fair state pay less on fuel because of lower fuel taxes, would they not have more money to spend on other activities?  Would that not benefit the state?  And wouldn't the lack of fuel taxes provide an extra inducement for people to visit our state?  Just some questions to ponder.  This is another way in which our state can be a leader.  And just imagine how hilarious it would be to see people from Evanston driving to Coalville to save buy gas?