One of the proposals from the Bowles-Grayson deficit reduction proposal was a call for a 15 cent increase in the gasoline tax. While I do admire the idea in principle in that it would help close the funding shortages for the Highway Trust Fund, I feel that this is the wrong approach in fixing this problem. For starters, the funding for highways contains no mechanism for increases in inflation. We are now paying for 2010 road projects with 1993 dollars, and we cannot afford to keep financing our roads with borrowed dollars. Furthermore, although our traffic has increased significantly since 1993, car fuel consumption is moving downward, and in a significant manner (an increase from 20 to 50 mpg is huge on tax revenues when extrapolated to a large population).
While some pundits have mentioned a consumption system that uses GPS tracking to record mileage, it is obvious that in the era of constitutional violations by the TSA and an increase in governmental tracking of its citizens, we cannot trust our government with this information. We do not need the government being our lifestyle police, and we also deserve to travel in peace and not have our movements tracked by some marketing agency.
Instead, I propose a more simple mileage recording system. Once a year, when we go to renew our car tags, we report the mileage we incurred in a single year. While this may be on the honor system, we cut out the taxation middleman and make the payments ourselves. Alternatively, we could offer a discount payment system where if one reported and paid their mileage daily, weekly, or monthly, they would obtain a reduction in their gasoline tax owed. This system also rewards reductions in unnecessary driving, as if one wants to lower their tax bill, they just drive less. We also would set the rate high enough to ensure that an honor system of self-reporting would cover our highway needs even with some degree of cheating. Even if we lost 5-10% in revenue, cutting out the bureaucracy would be a first start to eliminating governmental intrusions into our lives. We could target audits towards the most egregious offenders (those that report mileage that is 3-4 standard deviations beyond normal). Furthermore, the per-mile tax rate needs an inflation/deflation component built in. Highway funding is not something that our country from an economic and national security perspective that can be done on the cheap, and we need to pay for our roads in current dollars. On the other hand, the purpose of the government is not to make money off the taxpayers. If deflation kicks in, then we should reduce the gasoline tax and allow the citizens to invest the savings in other parts of our econcomy.
Our country in the long run cannot keep increasing the per-gallon gas tax rate forever. Eventually, the supply of fuel guzzling cars will diminish, and we will have a population of cars that consume little, if any, fuel. While this is not a problem that can be fixed overnight, it is something that we will run into long term and cannot ignore. We need a more stable and equitable highway funding method, and a consumption-based tax would be a step in the right direction.