November 17, 2004

And you're working for no one but me


Kevin Drum links today to an LA Times story regarding Gov. Schwarzenegger's appointment of a new Director of Motor Vehicles, who advocates taxing Californians for the miles they drive. It seems state gasoline tax revenues are dropping because newer cars use gasoline more efficiently. Kevin says:
Let me get this straight. For years we've been trying desperately to get people to buy more efficient cars, and one way of doing it is to tax gas guzzlers at a higher rate than hybrids and other fuel-efficient cars. It's good for the environment and it helps reduce our need for imported oil. And it's working! So what happens? Now people are worried that it means lower gas tax revenues. Drivers of fuel hogs think it's unfair that they should pay more than drivers of hybrids. So let's think of a way of taxing fuel-efficient cars at higher levels. Yeah, that's the ticket!
A better example would be cigarettes, the taxes on which have skyrocketed in recent years. What will happen when cigarette smoking declines to the point that we aren't raising as much money through those taxes?

Two points if you said: "We'll find something else to tax!" Oh, but the cigarette tax (and the gasoline tax) weren't really supposed to exist for their revenue potential so much as for their social benefit of discouraging behavior (driving or smoking). Don't let that fool you -- they are both excuses to raise money, pure and simple -- which goes to show that taxing as social policy is a bad idea because when the social policy ends are met, there's still the revenue maw to fill.

We shouldn't tax for "social benefit" -- we should tax appropriate economic and use activity. The California dilemna simply proves the point, because if the social benefit were the only purpose behind the tax, then dropping revenues would be greeted with cheers instead of new taxes. Or, I could say it this way:
If you drive a car, I'll tax the street
If you try to sit, I'll tax your seat
If you get too cold, I'll tax the heat
If you take a walk, I'll tax your feet
Taxman

'Cause I'm the taxman,
Yeah, I'm the taxman
Posted by Peter at November 17, 2004 08:52 PM
Comments

This is all correct. Once Govt. gets accustomed to that revenue stream, it is hard to give it up. Usually because you are using it for something that maybe has some benefit, and you are reluctant to kill that program. But what I want to know is, if we don't use tax legislation to discourage/encourage behavior, than how do we discourage/encourage behavior? Keep in mind that an answer of "the bully pulpit" will be deemed lame.

Posted by: Glenn at November 17, 2004 10:08 PM

It's not that I'm necessarily against trying various negative incentives -- I'm against the hypocrisy of enacting the tax for some "good reason" only to have that reason morph when the end is achieved. And the more money you raise by the tax, the more likely this will happen.

Posted by: Peter at November 20, 2004 06:38 PM