Diary

Another "trust fund" is bankrupt because you don't pay enough gas tax

Gas prices now average about $2.50 per gallon, and some economic experts argue that they are low enough that American consumers can now absorb an increase in gasoline taxes.  Too many in Washington just can’t stand to let a chance to raise taxes pass by.  Indeed, [mc_name name=’Rep. Nancy Pelosi (D-CA)’ chamber=’house’ mcid=’P000197′ ] was quoted last week as saying, “If there’s ever going to be a time to raise the gas tax, the time when gas is so low is the time to do it.”

The federal gasoline tax has been held at about 18.4 cents per gallon for the past two decades, and over that time the federal Highway Trust Fund (given what’s happened with Social Security, does anyone have any “trust” at all in anything that the feds refer to as a “trust fund?) has achieved a $100 billion shortfall.

Why? Experts cite more efficient automobiles as one reason. Much of the increased efficiency in American automobiles is mandated by federal CAFÉ standards, which add substantially to the cost of every vehicle that Americans buy. That means that the meddling of Washington results in an increase in the cost of the vehicles we buy, and is then used then to justify an increase in the taxes that we pay.

Taxes turn free-market economics on their ear.  In a natural state, supply and demand provide for the most efficient way of allocating scarce resources. As the supply of a product increases, the price decreases, and as the supply of a product decreases, the price increases. With the perversion of a meddling and tax-crazy government, a decrease in demand necessitates an increase in the cost, even though many of the factors that led to the decrease in demand has already cost consumers dearly.

It seems that the reason that crude prices have dropped recently is also lost on our elected tax collectors. Why has the cost of crude decreased by 50% over the past few months? Is it because oil producers in the Middle East wanted to give us a break? Of course not. The reason prices have decreased is that supply has dramatically increased, in large measure through increased American and Canadian production in spite of Washington’s efforts to block it. It is the result of natural economic influences working in the free market. Furthermore, it is easily predictable that a reduction in the cost of gasoline will increase usage, and that will then increase the tax revenues that Washington collects from the gas pumps. If they do increase the gasoline tax by another 12 cents as some RINO’s in the Senate recommend, demand will be reduced again, and revenues will drop, leading to the never ending vicious cycle of reduced consumption and calls for increased taxation.

The best long-term solution would be to reduce the role of the federal government in highway infrastructure issues, and there is legislation (the Transportation Empowerment Act) that would return control of those issues to state and local governments. The last 50 years have shown conclusively that Washington is unworthy of our trust with anything it refers to as a “trust fund,” and that it will use the tax code to influence behavior, regardless of its effects on the economy. Washington has done enough restrain the economy and hamper employment opportunities, and we can only hope that the Republican congress will act like Republicans.