Light Foot on the Tax Pedal

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When you fill up your gas tank these days, you know you’re paying a lot for the high cost of oil, but you’re also paying a lot for something you may not have thought of: Taxes.


In California, gasoline taxes amount to about 60 cents or so a gallon. That’s about a fourth of the retail cost of gasoline. It’s also the second-highest gas tax in the country, according to the American Petroleum Institute.


I point this out because the idea of raising the gas tax is being mentioned as a way to pay for Gov. Arnold Schwarzenegger’s ambitious plan to expand the state’s freeways and roads. (For more, see the editorial on the opposite page.)


To be sure, raising the gas tax may be a good way to pay for road construction. After all, gas taxes used to pay for road construction is kind of a user fee. Those who use the roads more would pay more. That’s simple and fair. No argument there.


My argument is that we should be cautious, even reluctant, to raise taxes on gasoline. A couple cents per gallon would be fine. Trouble is, there’s a tendency by many in the pro-tax crowd to push for gasoline taxes of dollars-per-gallon, not cents per gallon.


We should be reluctant to raise gas taxes because they’re regressive: Each time a poor person fills his gas tank, he pays the same $10 or so in taxes as a wealthy person. In fact, the poor may well pay a higher percentage of their income than the rich.


Beyond that, higher gas taxes especially hurt those who depend on transportation for their livelihood. Among them: Taxi drivers and contract delivery people. If any gasoline tax were applied to diesel fuel, then the pain would spread to truck drivers, farmers and the like.Of course, gas-tax advocates shrug off those arguments and say those people can simply pass on higher gas taxes to their customers in the form of fuel surcharges or higher fees. But higher costs, whether surcharges or fees, typically lead to a loss of business.


One favorite argument from the pro-taxers is that gasoline taxes and prices are “low” in the United States compared to most European and Asian countries. That argument is as silly as the trick kids use to stay up late. (“But Johnny gets to stay up to midnight.”)


Just as your parents told you that you’re not Johnny and Johnny’s situation is different, someone needs to explain to the extreme pro-taxers that we’re not Europe and Europe’s situation is different.


Europe is compact while the United States is large geographically. Goods transported from Los Angeles to Chicago must travel more than three times the distance for goods transported from Paris to Munich. Europe can more easily tolerate high gasoline prices. Our situation is different. We cannot tolerate it as easily.


Although many complain about the rise in oil prices, few complain about the upward creep of taxes on gasoline. In inflation-adjusted terms, the tax on a gallon of gasoline has increased about 50 percent in the past 25 years. The price of oil, despite its recent rise, is about where it was 25 years ago.


Raising gasoline taxes to pay for new roads? Sure, I’m for it, so long as it is a modest increase. Gasoline, a commodity we so heavily rely on, already is taxed heavily enough.



*Charles Crumpley is editor of the Business Journal. He can be reached at

[email protected]

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