Tuesday, January 06, 2009

Oregon remains economically retarded

Not only are they socialists about gasoline dispensation, but it seems Oregonians are similarly dumb about gasoline taxation.

I can appreciate the problem that Oregonians have: Folks are driving less, and driving more fuel efficient vehicles, so they consume less gasoline, which means gas tax revenues decline. And gas tax revenues are used to keep the roads up. So the roads are getting similar wear, but the state lacks the similar funds to care for them. And while taxing the road usage seems reasonable, in that heavy users ought to be heavy payers, does it not make more sense to just, you know, raise gas taxes?

Yes, electric vehicles won't use gas, but will use roads. So the state will have an expense without offsetting revenue. But kicking in a mileage tax just gives people less motive to drive anything fuel efficient. High gas taxes provide heavy commuters incentive not to be heavy polluters. But if it's the mileage that gets taxed, then one might as well ride in style and comfort in a giant inefficient vehicle.

If Oregon is really worried about high mileage, low fuel tax revenue vehicles, they should adopt a tax scheme that considers the weight of the vehicle. Driving a Hummer 50,000 miles does more damage to roads than driving a Prius 50,000 miles. If one assumes a car's lifetime is a fixed number of miles (maybe 100,000?), one need not even track the mileage, since each vehicle will do its (weight x mileage) damage over its lifetime, where weight is the primary determinant of damage.

So just do a vehicle weight-based tax when a new vehicle is registered in OR, where new = less than 10,000 miles on it. Of course, this will drive people to try to register vehicles out of state, and provide a disincentive to buy newer (possibly more fuel efficient) cars at a time when the auto industry is dying for customers. Which is why simply raising the gas tax makes infinitely more sense. And why Oregonians are terrible economists.


Seems Mankiw agrees.