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January 04, 2009 | | Comments 69

Change the Gas Tax

This is a follow up to a post from a couple of months ago <Green Fee Now>.  Lower gas prices have come as I predicted in this article, and I suspect the commitment to investing in green alternatives to fuel our transportation will wane.  Hopefully, I am wrong.

I differ in how much to change the gas tax, where to spend the money, and how to distribute the money, other than that I agree with the study by the National Commission on Surface Transportation Infrastructure Financing (only in Washington can they come up with a name like this).

I propose a variable federal gas tax which would create a more fixed retail gas price, how is that for political speak.  I think it is simple, let me explain.  Set a target retail price for gasoline, and vary the federal tax collected as the price of oil increases or decreases.  If market based oil prices rise, and the subsequent gas at the pump goes up then the federal tax is lower to maintain a gas price within a range.  Since the current federal tax is 18 cents on $1.60 average price, the ability to control the retail price is somewhat limited but it make logical sense to me that in the time of $4.00 per gallon pricing the tax should be less if not zero, and at $1.60, the tax should be more.  There is math required here to make sense of this and I am sure economists can come up with a model to implement.

Second, I don’t think the money should go to ‘infrastructure’ projects, whatever that means.  I say that because it is one of the overused words in Washington D.C., now.  That and ‘Investment’, tag a spending idea with one of those terms and it should be smooth sailing.

Here is the point, the Federal Government spent $50B dollars last year from the gas tax to support ‘Infrastructure’ projects in the states.  This represents 25% of ‘infrastructure’ spending last year, so the States chipped in the rest (remember the state gas tax is in many cases more than the federal), so that would equate to $200B spent last year on highways, bridges etc. These numbers are from the NCSTIF mentioned above.  Similar amount over the last five years also.  Ok, and our roads and bridges are a mess?  Why are they still a mess?  Has anyone looked into how this money is spent?  I have a simple point of view, however it is distributed, it is NOT working.  So, why would we put more money into this system?  As a business person, this current approach is not worthy of new funding.

I propose creating a Green Financing Fund.  The annual federal gas tax would be loaned out to private industry, working on alternative, cleaner, more sustainable transportation systems.  It is targeted investment (see even I can’t avoid the word!), in replacing oil based fuel.  Loans from this fund would be made to qualified companies, at a low interest rate.  Interest paid would be returned to the federal government and used for federal highway projects (the old way).

This would create a wave of Venture capital flocking to new ideas.  Low cost capital is one of the many things inhibiting growth for these companies.

We need different, bold ideas to turn things around.  Spending more money in an ineffective system is not the way to go, no matter, if the projects are ‘shovel-ready’ or not.  I can assure you the job sectors most effected by the current recession is not road builders, or bridge repairers.  These recent proposals in Washington, wrapped in the ‘save our jobs’ flag is nothing but marketing and political speak.

There is inherent waste, bureaucracy, and cronyism in the system now and we should not support it.  Shake things up !

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  1. From Posts about Investors in Startups as of January 4, 2009 | The Lessnau Lounge on Jan 5, 2009
  2. From Change the Gas Tax on Jan 5, 2009

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