May 10, 2005

A Study In State Interests

Once you let the state tax something, like consumption of alcohol, pornography, or behavior like gambling and fuel use, you give the state an interest in preserving and encouraging the device that funds it. Arguably, by letting states profit off of 'evil, heartless, monstrous' tobacco sales, you remove the interest the state has in banning the acitivity. Although it does make an activity seem seedier and more objectionable, it also makes it more important for the state to maintain - or see funds dry up.

Eventually the taxes take on a life and justification to themselves. Rather than punishing activities some people find undesirable, taxes are there simply to raise revenue. For example, look at Oregon, where a VMT proposal would calculate total miles traveled and charge a tax for each mile. This is to make sure drivers of cars like the Prius and other hybrids continue to pay taxes and support the state budget.

I can only imagine when somebody will call hybrid cars a "tax loophole."

Of course, the Oregon example is far more egregious because it would install GPS into cars and charge extra for driving in congested areas during rush hour. The data would be downloaded at gas stations.

Of course, they could always just move to high-speed tollways (tolls can today work with cars moving over 120 mph) if they wanted to charge for road usage and to discourage use of certain roads during rush hour. Nobody really likes tolls because they know they have to pay it, as opposed to fuel taxes that don't require slowing down and are charged semi-covertly. But high-speed tolls eliminate the need to slow down, license-plate cameras detect fraud and variable pricing technology can find the right balance between cost and consumption (road usage).

Obviously somebody has to somehow pay for roads, so it does make the most sense to use a mechanism like tolls as a direct user fee. You drive the road, you pay for its upkeep.

'No free rides' is especially apt in this situation.

Another alternative to no-slow tolls is a subscription (possibly one-size-fits-all, possibly different packages for different places, states and types of roads) where you could pay a monthly/yearly fee, get a little colored sticker for your window or bumper or license plate, and then security guards or license-plate cameras could enforce it enough to keep out the free riders.

Both systems suffer the same flaw: when the government covertly taxes you, you don't have to see it so obviously and you don't have to do anything special or fill anything out. Of course, besides being confiscatory, these methods remove the cost-benefit analysis; if I'm barely conscious that I'm paying for roads, how will I know when I'm getting my money's worth? So it would be beneficial from an economic standpoint to move to no-slow tolls or some sort of sticker-subscription method, even as it runs the risk of being prohibitively annoying.

Still, most anything, I think, would be better than having a little spy-bot in your car to snitch on your driving hours, habits, and destinations. Hell, how long until the police know where your car is at all times? Do we really think the DMV would hesitate to share your location with the police in a murder investigation? If we have a car tracker in every automobile, would there be any major reason to not have people-trackers? Okay, that's a little slippery slope, but I think it's a plausible sequence of events, especially the parts before the previous sentence.

But back to the economics of the subject, I think it's good to charge the people using roads and tyo charge roughly proportional to usage of the roads, but it's now obvious that any pretensions of the gas tax to discourage polluters is gone (in the Oregon state government). It's to pay for state functions like the roads, plain and simple.

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