This increases the price to $3.245 per gallon in the first year and close to $3.31 per gallon by the fifth year. Since Rep. Nielson's proposed increase is only for five years, hopefully the price will revert back to $3.23 per gallon after the fifth year. One should note that tax revenues raised depend upon forecasts of gasoline prices and gasoline consumptions.
A Sept. 24 report shows that per capita gasoline sales have fallen 20.8 percent since 1989, much before the recent fall in prices (http;//advisorsperspectives.com).
The fall in prices and consumption is due to alternate sources of cleaner and cheaper energy, as well as due to technological changes in the transportation industry.
For example, The Salt Lake Tribune reported Oct. 24 that eight states including California and New York have signed a pledge to put 3.3 million zero-emission cars on roads by 2025. These trends portend trouble for raising tax revenues by increasing gasoline taxes.
The question therefore is, what is the best way to raise tax revenue for meeting transportation needs, especially roads and highways?
Since wear and tear of roads and highways depends upon amount of use, it makes more sense to develop a user charge based upon that. If the new technology allows a device in cars that converts the amount of gasoline or alternate energy used into equivalent mileage driven, then a tax could be imposed on the basis of mileage driven.
However, in the meantime, rather than increasing gasoline taxes to raise revenues, increasing use could be made of toll taxes on major highways to raise revenues to finance roads and highways and other infrastructure projects.
Those who advance the cause of gasoline tax to reduce carbon imprint would find carbon tax as the most efficient and comprehensive way to achieve that goal. Professor William Nordhaus of Yale reports in The Economists' Voice, September 2010, that the "optimal carbon tax in current prices in 2015 would be between $12 and $25 per ton of carbon dioxide."
This tax is recommended to rise 6 percent per year, adjusted for inflation. Carbon tax would also be a good revenue source to finance infrastructure and clean-energy projects.
Hence, the idea of increasing gasoline taxes that is floating around cities and towns and among political circles is outmoded at best. It is time to think out of the box.
Vijay K. Mathur is former chairman and professor of economics and now professor emeritus, Department of Economics, Cleveland Sate University, Cleveland, Ohio.