Thoughts on the gas tax

March 5th, 2015 by Leave a Comment

The Tax Foundation has released a new report to help federal lawmakers figure out how to address transportation challenges. Some of the advice could also prove helpful to Georgia as we struggle with similar problems.

From the Tax Foundation’s press release:

If lawmakers decide to look for revenue instead of cutting trust fund spending, their source of revenue should be long-term and should connect drivers as closely to the cost of funding the roads as possible, according to the latest report from the nonpartisan Tax Foundation.

One option is to increase the gas tax, adjust it to inflation, and offset that increase by reducing another tax by the same amount of revenue. Besides being revenue neutral, there are good policy reasons for this swap:

  • Unlike some other taxes, the gas tax is relatively less distortive. It doesn’t significantly impact economy or reduce the incentive to invest. By lowering more distortive taxes, such as the capital gains tax, and raising the same amount of revenue from non-distortive taxes, not only would the Highway Trust Fund have enough revenue, but the economy would grow as a result.
  • Although the gas tax isn’t perfect, it more effectively connects government revenue to related expenditures than, say, the individual income tax.

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