Does Better Gas Mileage Mean More Tolls?
What could possibly be wrong with getting better gas mileage?
It is supposed to lower our dependence on foreign oil and reduce global warming.
And, of course, it will be cheaper to drive a car.
So far, so good.
Long ago, taxes were added to the price of a gallon of gasoline.
The federal government added a sales tax and uses it to fund the Highway Trust Fund, which is responsible for repairing interstate highways.
States added a sales tax on top of the federal sales tax. They use it for highway repairs or for general revenues.
What happens when drivers get more mileage for each gallon of gas they buy?
They buy less gas. And both the federal government and states get less revenue in taxes.
In anticipation, to cover road and bridge repair, Virginia is adding toll roads.
Hasn’t Gas Mileage Been Getting Better Already?
Actually, gas mileage improved by 60% between 1980 and 2006.
However, in the same time, cars got bigger, heavier and more powerful, so the effect was a modest 15% improvement, according to a recent MIT News report.
The Congressional Budget Office has projected that the new proposed CAFE standard rules will improve gas mileage an average of 21%.
The Corporate Average Fuel Economy (CAFE) regulations were first enacted in 1975, after the 1973 Arab oil embargo.
Under the new rules, automakers agree that by 2025 cars and light trucks will get an average of 54.5 miles per gallon.
This will reduce revenues to the Highway Trust Fund by $57 billion between 2012 and 2022.
Since states also use gas taxes, improved gas mileage will affect their budgets as well.
How Much Does the Government Get in Gas Taxes?
The Federal government collects a flat 18.4 cents per gallon of gas as a sales tax.
Most states charge their own flat rate per gallon of gasoline purchased. Many also charge an additional flat or variable rate.
North Carolina, for example, has a flat rate plus a variable that is calculated at 7% of the wholesale price of gasoline the previous six months.
It makes sense that if the petroleum-based price of asphalt to repair roads goes up, so should revenues from gasoline taxes as the price of gas rises.
Click here for a map of what each state charges.
Click here for a table of the flat and variable rates states charge and what the revenues are dedicated to.
States or counties may use their gas taxes for other purposes than road repair, such as Maine’s tax for the Coastal and Inland Water Fund or Mississippi’s county Seawall tax.
History of the Federal Gas Tax
The federal gas tax was passed as part of the Revenue Act of 1932, under President Herbert Hoover.
It was included in a basket of taxes in an effort to balance the budget as the country slid into the Great Depression after the Stock Market Crash of 1929.
It was intended to fund road-building efforts, which, in their turn, were meant to help get people back to work.
It was temporary until 1941, when it was made permanent to help fund World War II.
It was increased in 1951 to help fund the Korean War.
In 1956 it was increased and dedicated to the Highway Trust Fund, responsible for the building and maintenance of the new Interstate Highway system.
In 1983, it was increased and its scope extended to devote a portion of the revenue to the Mass Transit Account.
In 1986, it was increased and a portion dedicated to the Leaking Underground Storage Tank Trust Fund, part of the Superfund for cleaning up toxic sites.
In 1990, it was increased, with half of the increase going to Federal budget deficit reduction.
In 1993, it was increased, with all the increase going to budget deficit reduction, until 1997, when the increase was redirected back to the Highway Trust Fund.
The Federal gas tax remains where it was set in 1993 at 18.4 cents a gallon.
The Federal gas tax is one of several revenue sources for the Highway Trust Fund, which also include sales taxes on tires and truck and trailer sales, and an annual tax on heavy vehicle use.
Do you remember the gas wars of the 1960s, when gas stations competed to have the lowest prices?
Do you remember 29-cent gas?
Do you remember getting glasses and green stamps with your gas?
To you and teaching your grandchildren the value of being frugal.
Carol Covin, Granny-Guru
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Does Better Gas Mileage Mean More Tolls?