Bear with me, Oregonian, but up here we have “Sales Tax.” The concept is this: when you buy something non-essential, a 6.5% premium is tacked on by the state and 2.3% by the local government. Unlike you, we do not have state “Income Tax.” Also, unlike you, we are forced to pump our own gas in an uncivilized fashion. But I digress.
So, say, for instance, you buy a Twinkie for $1.00 (pre-tax). This is already the worst example ever, because Twinkie is classified as “food,” but whatever: You have just injected 8.8 American cents into the local coffers for education, transit, or stop-and-start municipal dithering. (Again, I digress.) (But if you’re up here, be aware that the viaduct you’re likely to drive on or park under is subject to collapse at any moment, due to municipal decision-making paralysis.)
On the face of it, sales tax seems kinda fair–the more non-essential stuff you buy, the more tax money you pay. Well, I’m inclined to think sales tax is actually a bit regressive, which I’ll explore another time, but it’s the rule of the road in places that aren’t Oregon.
So: you pay $1.09 (they always take that extra .2 cents, like Richard Pryor in his tour de force performance in Superman 3), and the local government gets 8.8+ cents. You’ll notice that if you were to pay $2.18 for your Twinkie, then the local government gets 17.6+ cents. That’s the thing about percentages, they’re straightforward and nonjudgmental. If the Twinkie company can figure out how to get you to buy Twinkies for $10, then they get a nice healthy profit of, oh, $9.99, and local government gets a sweet 88 cent payday. Fair’s fair: sales tax is blind to the cost of the Twinkie. The government’s pie slice increases in proportion to the overall pie’s size.
At last I’m getting to the point: the other day my Conservative Adversary was lamenting the awful burden of gas taxes, which got me wondering. I dug around and here’s what I found:
In 2007, the average price per gallon for gas is, oh, $3.20. Of that $1.78 goes to purchase raw crude, $.38 goes to distribution and marketing, $.58 goes to refining costs and profits. The rest–$.46–is federal ($.18) and state (~$.28) taxes. That works out to a 14.4% tax on gas, which compares favorably to the rates elsewhere in the first world (tax per gallon rates throughout Europe vary between 50% and 70%)
So: as with the Twinkie, you’d think that the more you pay for gas, the more money is pouring into your government’s coffers, right? Maybe that knowledge helps takes a little edge off of your $50 fill-up. Except it’s not true: in the US, the tax per gallon is actually fixed ($.184 per gallon for the federal government, plus an additional amount for your state–$.28 for Washingtonians, $.24 for Oregonians).
In fact, federal fuel tax has been 18.4 cents per gallon since 1993, when the cost of gas was $1.20 per gallon (that’s a marginal rate of 15.3%in 1993, vs. a marginal rate of 5.8% today). First, imagine we simply adjusted the 18.4 cents in 1993 for inflation, we would be collecting 27 cents per gallon today: that would mean the federal government would make 9 more cents each time one of our 317 billion gallons of gas per year is sold, and would mean roughly $27 billion more per year in federal tax revenues.
And what if, like all “regular” sales taxes, gas taxes had been fixed at 15.3% in 1993? We’d be paying 30 cents more per gallon, and we’d be pulling in roughly $100 billion per year more in federal tax revenues (Funny, that’s the going rate for an occupation in Iraq.)
Okay, so any notion that federal gas tax is either high or rising is a lie. So where does this notion of gas tax burden come from? I am not sure: I checked Washington state’s gas tax history, and it’s been locked in at about 25 cents per gallon (accounted in 2005 dollars) since 1977; Oregon hasn’t increased its 24 cents per gallon in 15 years. So that’s not it.
To throw one last log on the pile, gas taxes are a hybrid kind of use tax and sin tax–tax revenues are typically poured back into transportation infrastructure, but, as President George Bush has said, we have an “addiction to oil,” so you’d think we would want to start discouraging gas use. We’re not doing anything of the kind: crude producers are making more money, refiners are making more money, distributors are making more money, consumers are paying more money, but tax revenues per gallon, since they’re fixed in 1993 dollars, are dropping like a heavy 50 pound lead rock.
Summary: I have no idea where the misconception about undue gas tax burden comes from. There is no undue gas tax burden. At a time when we are amassing a budget deficit in the hundreds of billions per year, owing in part to our oil entanglements abroad, you’d think that common sense would dictate higher fuel taxes for national security reasons.
Sources:
http://www.vtpi.org/tdm/tdm17.htm
http://www.artba.org/economics_research/reports/gas_tax_history.htm
http://www.randomuseless.info/gasprice/gasprice.html
http://www.westegg.com/inflation/
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
