Thursday, January 11, 2007

Gas Tax Proposal

Back in October Greg Mankiw published an article calling for a much higher gas tax. I am beginning to agree but for slightly different reasons. Though instead of just raising taxes, I would like to see the American people get something out of this that will improve the efficiency of government.

So here is my proposal: Keep the federal gas tax as is but eliminate the Federal Highway Trust Fund and instead dedicate the taxes to General Revenue.

This proposal removes the federal bureaucracy and federal legislature from funding decisions on highways, which are regarded as complete. I would like to return decision making for highway investment to state governments, who are closer to situation and thus able to make better decisions. Under this proposal states would not receive any highway funding from the federal government so they would be forced to find other alternatives such as raising their gas taxes or privatizing their highways along the Indiana Toll Road model.

The remaining federal gas taxes will fund the military expenditures that are increasingly necessary to guarantee the supply of oil from unstable regions like the middle east, which is a proper federal priority.

Our Federalist system calls for each state to look after its own interests and for the federal government to look after the interests of all of the states. Before we had completed the Interstate Highway System, road construction was a proper federal priority on national security grounds. As that system is now complete this proposal will serve to refocus federal attention on national security and refocus state and local attention on maintaining their roads.

The obvious problems with this proposal concern vested interests. The federal bureaucracy and legislature like the clout that come from telling the states how to spend money on roads and the State governments like to pass the buck to the federal government. Government at all levels needs to get serious about their proper priorities.


Travis said...

Bangert, I wrote a post on this @

Anonymous said...


Increasing the excise tax on gas would increase the incentive for the market to develop alternative fuels. Last night on Kudlow and Co., Mankiw referred to the current proposals as, “sounding as if they came straight out of the Kremlin.” Mankiw is fond of the idea of lowering income taxes with the revenue raised from the gas tax. Presently, shifting toward consumption based taxes, as opposed to income, is especially important.

Taxing income does nothing to encourage saving. However, taxing consumption makes saving more attractive. Since Americans do not save, our investment is funded from abroad.

The alternative to Mankiw’s proposal sounds something like, “I want to take those profits and.............” -You Know Who (Hillary) This sort of arrangement will NOT make a more efficient government (potentially oppressive, but not efficient). This is how the pigs take over the farm.


P.S. Nice blog.

Michael Bangert said...

Travis, Falcon,

Thanks for your comments. I agree that the President's plan does nothing to improve incentives and is nothing more than heavy handed state interference in the economy. My proposal assumes that the costs of transportation will increase, so I just want more efficient government in return.


Pete Duffy said...

Our WA state gasoline taxes are spent on highways, bridges, and ferries, but not on city streets (where most of the gasoline is used.) It would be political suicide for a city council member to suggest a local gasoline tax for street upkeep, or any other purpose. And of course such a tax would just drive people to the suburbs to purchase gasoline. I suggest a federal gasoline tax that would be rebated to the cities and counties where it was collected, for the purpose of road construction, maintenance, and traffic safety? This kind of tax would bring the full cost of driving to the driving public.

If the tax rebate was tied to a requirement that the local government rely upon this source alone for all road related expenditures, we could see some dramatic reductions in sales taxes, real estate taxes, and state income taxes.

Michael Bangert said...


Thanks for the comment. My issue with your proposal is that the federal government has to get involved in collecting and then distributing money. That just allows for to many opportunities for waste. My idea, as I mentioned in the post, is to take the federal government out of distributing highway funding, but have them still collect a gas tax to offset the military cost of keeping oil available.