Monday, October 05, 2009

Where Efficiencies Run Into Reality

Instapundit points out that Oregon is once again considering mileage taxes and that a national mileage tax is coming under consideration in Congress.

I've discussed the subject of mileage taxes and the fact that they would be a poor substitute for existing motor fuel taxes, but the problem is much more than just fuel taxes and declining revenues as vehicles become more efficient. It creates a taxing feedback loop where revenues fall short of expectations and the taxing jurisdiction needs to raise revenue in some fashion - either by increasing existing taxes, or finding other items to tax in its stead.

The same problem exists wherever efficiencies drive the marketplace. We see it with home heating oil, electricity, natural gas, and other utilities that provide power for home and business usage. A significant portion of those utility bills goes to pay various taxes and fees. As homes and businesses upgrade to more efficient HVAC, fixtures and appliances, the less energy is used, causing a declining revenue per capita.

This is yet another fundamental problem with the tax base as currently construed. If you intend to raise a set amount of revenue from a given item, if the consumer's use of that item becomes more efficient, they will not need nearly as much of it, causing a shortfall in usage. The state's response to the shortfall is either to raise the fee or tax or to incur a shortfall in revenues.

No comments: