The Federal Gas Tax Needs to Go! Refuting the Pro Tax Talking Points.

Dave Durand-Contributor
“I got 99 problems, but a gas tax ain’t one… it’s actually two.”

On September 30^th the Federal Gas Tax expires unless it is re-authorized by congress. This means that on October 1rst, the taxes collected by the feds would drop from 18.4 cents to 4.3 cents per gallon of gasoline sold. This amounts to a 14.1 cent per gallon savings that goes directly into the pocket of the American driver. In perhaps an even more exciting prospect, the (partial) death of the gas tax requires the federal government to relinquish most of its control over transportation back to states where it rightfully belongs. What is the problem with that?

Believe it or not, there are those who oppose any plan that allows for you to actually control more of your money. The federal gas tax is no exception. There are three popular arguments given in favor of keeping the tax, and I have thoughts on each.

#1 - Eliminating the gas tax will bankrupt the Highway Trust Fund resulting in a crumbling of the nation’s transportation infrastructure.

No it won’t. If you are not familiar with how the gas tax works, let me quickly explain. Every state collects their own excise (sales) tax on each gallon of gasoline ranging from $0.08 in Alaska to $0.47 in California. That money stays in the states and is used to update the infrastructure within said state. On top of that, the federal gas tax of $0.184 per gallon is collected, sent to Washington DC to stock the Highway Trust Fund, and is then sent back to the states to be spent on updating the infrastructure within said state.  

So while it is true that the Highway Trust Fund will be depleted, it is also true that the money is kept at the state level instead of being funneled through the federal government. So if states like Alaska need more money to spend on transportation, then they are free to raise their gas tax up to California levels to compensate.

#2 – The transportation needs of a state are much different than the transportation needs of a nation.

Are they really? Do states need freely flowing lanes of transportation via road, rail, water, and air? Yes and so does a nation. Do states need these lanes to be safe, affordable, and easily accessible? Yes and so does a nation. Do states need to cooperate with each other so their transportation lanes are compatible in order to promote an easy exchange of commerce? Yes and so does a nation.

I will admit that this is one area where the federal government can play a role (albeit as minimal one). The commerce clause allows the feds “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”. Regulate literally mean “to make regular”. So the feds can establish standards that prohibit two bickering state legislatures from erecting unfair trade barriers. This happens to encompass interstate lanes of travel, but the scope is very narrow. But as far as taxes go, each state is more than capable to raise their own revenue without the help of the federal government.

#3 – If we let the gas tax expire, the result will be windfall profit for the oil companies because they will not pass the saving along to the consumer.

This is wrong for four reasons.

First of all, it only takes one gas station in your town to reduce their prices by the amount of the expired federal gas tax and it’s off to the races. The rest of the stations in your town will have to reduce their gas price in order to get your business. Competition works to your benefit.

Second of all, the big bad oil companies don’t own gas stations. They are generally franchisees. If you want to point to windfall profits, you need to look no further than you friendly, neighborhood gas station owner. Go inside, ring the bell, look him square in the eye (or as best as you can through the six inches of bullet proof glass), and ask for the bathroom key. When you done with your business, lecture him about the fact he rakes in all sorts of cash yet fails to stock the bathrooms with disposable toilet seat covers.  

Thirdly, the sale of gasoline is a loss leader for gas stations. In other words, they make little to no money on gas, but once you are in the store, they bet you will buy their coffee, milk, chips, soda, beer, Philly Blunts or any of their fine selection of slowly rotating, heat lamp cured “meats” (Stomach pumps are next to the video poker). 

You take advantage of the convenience, and they make a killing on the premium prices. Therefore profiting from the sale of gasoline price is not a primary concern for gas stations.

And finally, profits of privately owned business are none of your business unless you are a stake holder! However, if you do have a complaint, you should promptly start your own oil company, embark on exploration expeditions, extract the crude oil from the earth, refine your own gasoline, create your own distribution and retail network, and sell it at cost to expunge your guilt.

So let me conclude by stating that I be feeling you Jay-Z. The federal gas tax will more than likely be re-authorized and the double taxation will continue.

Maybe one day these United States will once again govern themselves as our Founding Fathers outlined in the United States Constitution. As sovereign states governed by the citizens therein and not by a centralized authority: As a voluntarily compact that comes together in the narrowest of circumstances and only to protect everyone’s natural right to life, liberty, and the pursuit of happiness. Where the property you earn cannot be taken from you unless there is a call to action to provide Peoria, IL with a new bike path that falls under the guidelines of a federal smart-growth urban-renewal grant from the Department of Transportation.

Ah America…