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  • The Tax Man Cometh - Whale Watching

The Tax Man Cometh - Whale Watching

People have become desensitized to ‘high’ gas prices.

G.R. Whale
Aug 15, 2014
As the nation headed into the holiday directly resulting from early Americans’ refusal to be taxed without representation, a couple of senators -- a Connecticut Democrat and a Tennessee Republican -- encouraged a significant bump in national fuel taxes to help keep the Highway Trust Fund afloat. Seems we’re short of infrastructure maintenance and replacement money again, and lifting the $0.184/gallon gasoline ($.0244 diesel) tax by six cents a year for two years, then tying the rate to inflation, is their idea to keep road crews busy
Six cents doesn’t sound like much -- just pennies after all -- and just another $6 every time you fill that 100-gallon cross-bed fuel tank that overloads your truck. The last effective increase was 4.3 cents/gal in 1993. But in two years, the tax will be up by two-thirds and without knowing what the “rate” tied to inflation is, your fuel tax could ostensibly double in less than five years. “Double” looks a lot worse than "6 cents," huh?
Years ago, I advocated a gas-tax increase to aid infrastructure and lessen fuel consumption better than CAFE ever did because we’re spoiled and don’t know it. With mid-June fuel prices, you could fill a 20-gallon thank for 76 cents in Venezuela, $4.50 in Syria, or $12 in Saudi Arabia, but do you or your female relatives want to live there? Our 20 gallons ($74) are less expensive than any other country with a similar standard of living -- Canada ($96), Germany ($158), Norway ($198) -- and most countries lacking the same standards and freedoms. That was then. But people have become desensitized to “high” gas prices and are back to buying pickups like the 5700-pounds (!), 13-mpg(!) half-ton in my driveway.
Photo 2/3   |   Tax Sign
Now I think I have a better idea. With denser cities, more efficient cars and trucks, and people driving less, fuel-tax revenue is dropping while infrastructure material and labor costs rise; hence the Hill’s panic to do something beyond throwing your kids under the bus to pay for it.
But what? I argued against a miles tax because a Lotus, Super Duty, and Peterbilt don’t wear out infrastructure the same and all the privacy issues with your route being tracked. Do you have your phone’s GPS/location services on or off?
All these fuel-savers like plug-ins, electrics and hydrogen don’t use much, if any, gas or diesel, but a lot of them weigh more than a conventional gasoline unit. And if you look at the reasons for road wear, weight is near the top, especially when uncontrollable variables like weather are tossed out.
If you agree vehicles putting weight on roads should be the ones paying the most for their upkeep, how do you do it? By registration doesn’t account for miles driven. Fuel doesn’t because there may be little to no fuel involved.
So how about adjusting the tire tax? Everything on the road regardless of propulsion -- cars, trucks, RVs, and trailers of every variety both commercial and recreational -- rides on tires. First applied in 1918 the Federal Excise Tax (FET) on tires created the Highway Trust Fund that helped build the interstate system and is now budget constrained.
Photo 3/3   |   Big Tires
In 1982, the tire FET was revised so only heavy tires were taxed and that tax graduated with the tire’s weight. It was readjusted in 1997 and again in 2004, with the tax based on tire-load capacity rather than weight. The IRS currently taxes tires at $0.0945 for each 10 pounds of tire maximum capacity above a 3500-pound threshold. At roughly a penny a pound, it’s easy to figure a set of four 3640-pound rated tires generates about $4.50 in revenue. Curiously, bias-ply and super-single tires are taxed at half that rate.
I submit the threshold should be any tire approved for road use (DOT legal?) and a factor included for treadwear rating: An 80,000-mile tire lasts longer and wears roads more than a like load-rated 40,000-mile tire would, so it should be taxed more; sacrificial sports car tires with an 80 UTOQ rating would carry a low tax rate in part because they are replaced often. Opposition will argue that’s a regressive tax and it omits rail or water shipping, forgetting they don’t use the roads.
In reality, the largest question is not sorting out the tax but making sure the money doesn’t get diverted by some pork project or nifty accounting and not go to the roads as it should.
Maybe that’s what the senators should be working on.
- OF



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