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Friday, February 20, 2009

In support of eliminating gas tax in favor of national VMT

I support eliminating retail gasoline taxes and implementing a nationwide VMT tax.

VMT has not been implemented in many places (other than major Urban areas) mostly because the technology to implement either didn't exist or was deemed too expensive.
But, as our technological proficiency grows (esp. in the realm of GPS and computers in general etc.), this becomes less of an issue.

A VMT tax has many advantages over all other forms of externality-adjustments: increased regulation, increased gas tax, Carbon trading.

I've discussed why I oppose increased gas taxes nationally before, but another reason to oppose them relative to a VMT tax is the VMT tax tackles the externality directly: it is a direct tax on driving (the direct cause of congestion and pollution etc.). A gas tax is a tax on those things indirectly but such an effect is muted as part of this is offset by increased driving after consumers start substituting toward higher-MPG vehicles. Gas taxes (like regulations and carbon trading) incentivize better-gas-mileage production and consumption, but a VMT tax would be the same regardless of what kind of car is causing the externality.

This seeming strength of the VMT tax is also it's biggest weakness. We WANT to incentivize higher MPG cars and trucks and the technology behind it. We WANT to incentivize alternative energy other than gas. Gas taxes, regulation, and carbon trading can do this, but a VMT tax alone can not.

This potential downside can be offset if at least part of the VMT tax goes directly to support government spending on green infrastructures, alternative energies, and the like. Of course another way around this is to implement a "carbon"-adjusted VMT tax, taking into account vehicle type and charging a higher tax rate on larger vehicles or on "luxury" gas guzzlers per mile traveled. This could get a bit muddy and confusing to the consumer though, and could incentivize less safe vehicle production at the private level, so I prefer the former option which would allow the government to decide this directly.

The VMT would reduce 'frivolous' driving, increase bike trail use etc, increase demand for local produce consumption etc., reduce pollution.... Down the road, these devices could be installed in all new vehicles at minimal cost of marginal production (I mean they can put GPS in a little phone now).

Note that I'm NOT supportive of a VMT tax that would actually be a net increase taxes on consumers (for the same reasons I'm against a gas tax in general. I'm saying we should replace our existing gas tax with a VMT tax over the long-run - and that this in and of itself could create social efficiency gains over a gas tax.

3 comments:

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