Now is the time to raise the gas tax.
Right now, in the Brandywine Hundred region, the price for a gallon of gas is about $1.67. So if you are going to raise the gas tax to fund infrastructure and transportation improvements throughout the state, now is the time, when the prices are low, to do it. Personally, I believe the tax is a regressive tax that punishes the lower wage earners more than the wealthy. So a gas tax is not my first choice. But if you are going to do it, now is the time to do it.
And State Reps. Sean Matthews’ and Michael Mulrooney’s bill will allow a reevaluation if the price of a gallon of gas rises, as it surely will.
Delaware lawmakers are again seeking to raise the state gas tax by 10 cents a gallon, arguing it would allow the state to make critical improvements to roads and bridges.
The proposal from state Rep. Sean Matthews, D-Talleyville, and Rep. Michael Mulrooney, D-Pennwood, is different from the failed attempt Gov. Jack Markell made in 2014 because it would expire after a year, allowing lawmakers to take stock of where oil prices stand and decide whether or not to renew it.
Matthews estimates the increase would raise more than $50 million in additional revenue a year.
“I would hope that this could be a bipartisan issue,” Matthews said. “I think all members of the General Assembly, when they’re out and about, are hearing that people want work done on these roads. Until somebody figures out a way to get roads built for free, we have to pay for them.” […]
The current Delaware state tax on gasoline is 23 cents per gallon. It hasn’t been raised since 1995.
As long as it all doesn’t stay locked up in New Castle county
Right, that’s why the proposed bill expires year after year.
I heard this morning that less than 20% of what DelDOT takes in goes to actual road work. Does anyone know if that’s true? The number I heard was 17%.
Delaware raised DMV fees and weekend tolls just 7 months ago to pay for infrastructure projects:
This new law increases 14 fees, which will be used to fund the Transportation Trust Fund, including:
•The motor vehicle document fee is increased from 3.75% to 4.25%.
•The fee for late renewal of a driver’s license is increased from $1.15 to $10
•The fee for late renewal of vehicle registration is increased from $10 to $20.
•The fees for reinstatement of a suspended or revoked driver’s license are increased from $25 to $40 and $143.75 to $200, respectively.
•The fees for issuance of duplicate documents is raised, with the fee for duplicate driver’s license increased from $10 to $20, for duplicate titles from $25 to $50, for duplicate vehicle validation stickers from $1 to $5, and for duplicate registration cards from $2 to $10.
•The fee for a vehicle temporary tag is increased from $10 to $20.
•The fee for sale of driver’s licenses records is increased from $15 to $25.
•The fee to transfer a specific tag number from vehicle to vehicle is increased from $10 to $20.
•The fee to issue a title for a vehicle is increased from $25 to $35.
•The fee for issuance of a lien on an existing title is increased from $10 to $20.
This is on top of our regular taxes which are already supposed to pay for infrastructure.
I don’t know how middle class and low income Delawareans will be able to stay afloat if we keep taxing them multiple times for the same services.
Perhaps if the I-495 bridge in Wilmington had actually collapsed we’d have an even better argument for this.
I think 10c is probably not even enough, but I don’t even own a car so…
The I-494 bridge wasn’t deteriorating infrastructure, it was failed inspections. If there wasn’t a big pile of debris dumped there the bridge would have been fine.
“This is on top of our regular taxes which are already supposed to pay for infrastructure.”
That’s not so, at least not as concerns roads. DelDOT is paying salaries out of what was gathered and intended for use on road building and repairs.
Not sure where you got your numbers, but the gas tax is intended as a user fee. Other than general whining about taxes, why should it not be increased?
A lot of people who never stop and buy gas in Delaware pass across the 495 bridge. I’ve expressed my opposition to this in the past and it remains. Until we consider creating a tax bracket or two more at the top to help make our taxes more equitable, this is a no go for me.
We’ve had this chat before and I recall being persuaded that a gas tax isn’t really that regressive. I’d love for progressive and liberals to let up on that argument for a bit, because it does serve to reinforce the right’s leitmotif that taxes = bad.
I never conceded that in our discussions….a greater portion of the poor and middle classes incomes go towards the gas tax than that of the wealthy. Therefore, but definition, it is regressive. I’m not against taxes…I’m against regressive taxes. Just because “we can afford it now because gas prices are low” doesn’t make it any less equitable. At that rate, you might as well advocate for a general sales tax on everything. It works the same way.
I’m OK with a ten cent increase to fix the roads. I’d be OK with a much bigger increase as long as the increase is targeted to shift us off dependency on roads and fossil fuel.
That said, gas tax may be a user fee, but let’s be clear on who the users are. The benefit you get from the roads doesn’t always correspond to the miles you drive. A secretary may drive as many miles to work as his or her CEO, but who benefits more from the public route to work? Walmart shareholders benefit disproportionately from Walmart’s use of the roads, whether they drive or not. If you drive an electric car, where’s your user fee? There is an argument for funding the roads through the general treasury via a mix of progressive taxation and corporate taxation, in addition to gas tax.
Gas tax goes up .10.
Money goes to transportation trust fund.
Trust fund gets raided regularly to fill state budget gaps for everything but roads.
Cry ‘we need to invest in our roads and bridges’.
Raise taxes & fees.
Rinse.
Repeat.
Not sure where you got your numbers, but the gas tax is intended as a user fee. Other than general whining about taxes, why should it not be increased?
I got the 17% number from talk radio which is why I asked for confirmation. Why shouldn’t the gas tax be increased to pay for infrastructure? Because we already bit the bullet 7 short months ago to pay for infrastructure. It’s like getting a third bill for a pair of jeans you already paid for twice. Maybe if we hiked the gas tax and never had to hear the word “infrastructure” again it would be worth it.
Besides, I thought the toll increase on Rt. 1 was supposed to be in lieu of the gas tax? And wasn’t that toll originally designed to expire after Rt. 1 construction was paid off anyway? Or am I mistaken (I was young when that went down, so honest question.)
This in no way hits people equally. It also disproportionately hurts folks in Kent and Sussex counties where things are more spread out and the alternate idea of public transportation is completely inadequate and impractical.
My only (but its a big one) problem with taxing things like gas is, it hits lower-income people harder. I know gas is cheap. I know a .10 tax would still makes in insanely lower than even a few months ago. It’s more the principle of the tax. Tax oil producers, tax car makers who make inefficient cars, tax companies who burn fossil fuels in other ways. If you want to raise money directly for infrastructure (i sure as hell do) tax earnings at a progressive rate.
That’s how it’s done. Give people who make a million a year or who inherit 10 million a fat tax cut and make up for it by taxing the poor
When you guys come to the beach and it’s gridlock everywhere, please remember to tell upstate legislators that us hayseeds here in Sussex County need some road infrastructure too.
When it comes to Sussex County Roads, upstate legislators will fund a by-pass around a by-pass if it gets them to their beach home faster.
Driving east to west, not so much.
http://thinkprogress.org/climate/2008/04/15/202512/is-the-gasoline-tax-regressive/
The long(er)-term solution is to make the gas tax a percentage based tax.
$1.67 – the $0.23 tax = $1.44 base price
20% tax (random number)
New price at the pump $1.73.
If the base price of gas goes to $4.00, the price at the pump is 4.80.
It has the advantage of also rising with inflationary forces and supply forces.
The percentage should be inverse to the base price so it goes up as the base price goes down and vice versa.
That way the price at the pump stays level over time.
We’re going to raise the gas tax and hurt the lower and middle class because our state doesn’t have the stomach to do the right thing and put another tier or two into the income tax? Does anyone actually believe that someone making $60,000 a year should be taxed at the same rate as someone making $160,000 a year?
Tax Tax Tax, aka take take take is all you do here? Put the State budget on a spreadsheet and let voters vote on each line item, that’s democracy.
That might be a democracy, but we live in a republic. I suggest that you move to ancient Greece.
Old Bill probably doesn’t use roads, so ancient Greece might be a good fit.
Bus fares have risen upwards of 200% in the last few years. Talk about a regressive tax.
They need to find money to pay for the Middletown bypass and 3 new overpassed/interchanges for Rt 1 between Little Heaven and Milford
DD: Personally, I believe the tax is a regressive tax that punishes the lower wage earners more than the wealthy. So a gas tax is not my first choice.
Now I’m not a big tax guy, but let’s deal with actual data:
Since the first 1990 study by Poterba through every succeeding study (reference in the link to Greg Mankiw’s blog below) the finding is that the gas tax is only mildly regressive for middle and upper middle class folks, and not regressive at all for lower middle class and the poor. I know this is counter-intuitive, but I have looked at the data in multiple studies, and I’m convinced it is correct.
http://gregmankiw.blogspot.com/2006/06/is-gas-tax-regressive.html
Carney is answering questions on FB right now. Here is his take:
Shouldn’t the state wait and see how much income is generated by the 10 taxes and fees that were raised 7 months ago to pay for infrastructure before going after more money for exactly the same thing?
So are all gas tax supporters also in favor of a general sales tax? If not, I’d love to hear your explanation of the difference.
Because there’s also good reason for discouraging burning gasoline (or paying a premium to do it), but that same logic doesn’t apply to most consumer goods.
@Mkem
… because a sales tax is regressive all the way down, as opposed to a gas tax, which all research has shown to be barely regressive at all, and there only on the upper middle and affluent classes, not the lower middle class or the poor.
pwned
Steve – I am not familiar with this research. I suppose this is because the working class and the poor own cars and/or drive at much lower than average rates. Is this the basic reason?
Nay, not pwned….I get the need to discourage gasoline burning, but to make the poor and middle classes pay more because big corporations don’t give a shit about the environment simply holds no weight in an argument.
The studies that look at the gas tax not being regressive for the poor were not based in Delaware, where public transportation or walking to work is less of an option than in more developed urban areas. The poor in Delaware must drive to work, particularly in Kent and Sussex Counties. Therefore, they’re going to pay more. They may reduce their voluntary travel or usage, but their responsible choices do not make the tax any less regressive when other variables are held equal.
Carney: ” I was very disappointed that this year’s highway transportation re-authorization didn’t include, as a funding mechanism, repatriation of international taxes”
WTF? As far as I know Carney is in favor of some tax break gift to corporations who wish to repatriate funds. Has he changed his tune, or does he also want to bundle some highway funding into the corporate tax break?
Steve – I haven’t located or read those studies, and probably won’t. Can you share the rationale for why gas tax is not regressive on lower incomes?
Puck – Either way, a one time repatriation of money isn’t excactly a “funding mechanism” is it?
Puck – Studies show that upper incomes drive less fuel efficient vehicles AND drive more – so it isn’t regressive.
Liberalgeek linked to an article above.
@Mike – I’m not sure I agree with the argument, but you just asked what the difference is, and that’s it.
On Prof Newton’s comment, there’s reason to think that a gas tax is not as regressive as some assume. Intuitively I’d guess that this is because the lower-middle class/working class/poor are less likely to own a car and less likely to drive as much anyway. But I’ll let Steve answer as he seems to know more about it.
Here is a statistic-free gut reaction.
If all my neighbors driving Priuses, four to a household, pay less for maintaining road infrastructure than my neighbors driving old pickups, it’s unjust and not in line with the historical principles of the Democratic party.
Hint. If a tax affects landscapers and house cleaners more than the people who hire them, you’re raising the wrong tax.
OK, I admit this is drive-by analysis on my part, but the rationale for gas tax not being regressive for lower incomes is:
That may work in the areas around a major city, but I don’t think it works for Delaware. Ask any poor person if they need a car to get to work, and in Delaware the answer is Yes.
If an upper middle income family sells their ten year old Ford Explorer to a poorer family and buys a Prius – the cost of operating that Explorer must be factored into the analysis of whether the gas tax is regressive.
The poor family needs that 10-year old Explorer to get to work and school, and doesn’t have the option to choose a Prius.
People driving Priuses actually do less damage to the road than your neighbors driving pickup trucks.
OK I linked to the Greg Mankiw blog that discusses the studies in another post, so I won’t do it again. The earliest studies go back to 1991, but they have been redone without material change to the results at about 8-10 year intervals ever since. They are not, surprisingly perhaps, Mkem, heavily dependent on the efficiencies of mass transit, and do not have to be specific to Delaware to be valuable. After all, the rest of the country actually has a lot of rural working poor as well, not just Sussex County.
The data basically shows this: (1) Overall proportion of fuel purchased skews heavily toward middle, upper-middle, affluent, wealthy, and corporate buyers, partly because (as jason alludes above) they not only tend to drive much more, but tend to drive much less fuel-efficient vehicles. Very few Hummers or Ford Escalades being driven by the inner city poor. IIRC, the share of fuel purchases in the retail consumer market that is dominated by these economic categories of consumers tends to run about 75%, whereas their actual population share is about 8%. So in any gas tax hike, 75% is going to be paid by the wealthiest 8% and 25% by the other 92%. This progressivity or regressivity (depending on whether you’re a tank half empty or half full person) rivals that of the progressive income tax.
(2) Fuel tax costs for corporate and business users are obviously passed along in higher prices to consumers, BUT again the studies have shown that increased costs are massively and disproportionately larger for the types of items that the more affluent buy as opposed to the poor. Moreover, there is significantly greater price elasticity in the products that the affluent purchase; at a certain break-point (and convenience store retailers discovered this right after Katrina) people will stop buying bottle sodas and move to fountain sodas if the price of the bottled sodas go up too far too fast.
(3) Poor people, especially in cities, and even middle class people in cities, already consume significantly less fuel per capita than their counterparts in the suburbs or the country because even without the fuel tax their gas prices are generally 10-15% higher than the surrounding areas. Studies show that seasonal fluctuations in the base gas prices in densely populated urban areas have far more to do with changes in consumption than gas taxes.
(4) The other measure of regressivity (or the lack thereof) is that study after study has shown that the fuel buying patterns of poorer people do not significantly change even when there is a $.30+ change in the price of gas. Basically, the gasoline consumption of poorer people is generally static rather than elastic–they have to purchase gas to get to work, etc., and when the price of gas falls they don’t purchase more to take unplanned road trips, or they don’t purchase bigger cars, etc. On the other hand, for the more affluent, when the price of gas falls, consumption rises, not only primary but secondary consumption. Sales of SUVs almost always spike when gas prices fall, even though rational people would know that an 18 mpg SUV is a long-term commitment and a dip in gas prices to $1.69 is a short-term condition. The wealthier folks see dips as that sign to buy products that–ironically–will later increase their costs of ownership and operation. Thus they also voluntarily increase their share of the gas tax.
There are about six other significant variables that have been investigated by these studies, but the upshot is that the fuel-purchasing patterns of the relatively poor and relatively wealthy are already different enough that that gas tax increases are far less regressive than most other types of consumption taxes.
None of this should be read as necessarily support for the plan up for consideration, but data is data, and while everyone is entitled to his/her own opinion, they aren’t entitled to their own facts.
Liberal geek, I’m first to admit my neighborhood isn’t necessarily representative of neighborhoods with a less economically varied population, but here the people with Priuses cause a disproportionate amount of costs to the community, because they have elevated notions of what services and amenities are appropriate to have. So, for example, the wealthier folks want a fancy new playground, while others are okay with a safe swingset. The wealthier acquire land for the community, which is paid for by everyone…and not distributed by the value of your house. The wealthier enjoy cultural activities that put stress on the infrastructure that people who don’t participate wind up kicking in for.
I’m taking Steve’s research under advisement, but saying that low income spending flatlines when people run out of money is not, to my mind, saying that a tax is not regressive. What it says to me is that we aren’t taking enough money from higher income sources.
10 cent increase spread over 4-5 years.
Nobody is going to notice it.
Thank you for explaining so that I didn’t have to go follow the bunny trail of links. lol.
The conclusion that it is “less regressive than people think” to me still shows an inherent regressivity; moreover, common sense sometimes needs to kick in; I’m not anti science or research, but it seems like a lot of the argument is that the middle class and upper classes pay more as a result of choices that they make; the poor have many fewer choice but still have to pay more as the tax is implemented. By making different choices, the middle and upper classes could make this tax more regressive….which, to me, means that it is regressive in nature even if it presents as less so statically due to decisions made by higher income earners.
Brooke – my point is that, as a use tax, your example of Prius v. truck is fully appropriate. Puck had a very good point above about electric cars. What happens when they proliferate in 10 years? How will they pay for the normal wear and tear on the roads?
As it stands, the heavier the vehicle, the more they cost us in road repairs. Lucky for us, the weight of a vehicle is also a good predictor of how much fuel they use per gallon.
Most of the states around us already have much higher gas taxes (PA is more than twice our current rate, MD is about where $0.10 puts us). New Jersey is a notable exception($0.15/gal), but I don’t know that their lowest quintile is much better off than our lowest quintile of income.
Just for an idea of how much we’re talking about, let’s say someone drives 12,000 miles a year in a vehicle that gets 20 mpg. That’s 600 gallons of fuel per year. At a dime a gallon, that’s $60 a year, or $5 a month.
A little guidance for those whose answer here is “tax something else first”: Sorry, that’s not an option. It’s up or down on this, not “tax him, not me.” It doesn’t matter what your reason for that is, whether it’s progressivity or selfishness. Raising taxes on upper incomes is not on the table, so no is no, which simply means that all those fees will go up again.
Personally, I prefer to pay my taxes in small, barely-noticeable increments, rather than getting socked with a 4% sales tax — that’s what it is, people, a sales tax, not a “fee” — when I buy a vehicle. Your mileage may vary.
@LG: New Jersey makes up the difference in road tolls, which has the effect of overcharging high-mpg vehicles.
@all: Priuses use gasoline; they are hybrids, not electric cars.
Our legislators’ refusal to introduce a proposal doesn’t mean that it’s not an option; it simply means that they refuse to try it. If we reject other stuff enough, maybe they’ll get the point.
Another option that I think should be considered is an in state / out of state rate for the tolls. Why shouldn’t those who use our roads but perhaps not stop for gas in our state pay a bit more?
Geezer – I’m certain that most of us know that Priuses are hybrid, not “electric”. But they are the poster child of high MPG vehicles.
My point (and Puck’s earlier) is that the next step is electric vehicles. It’s already here with Tesla, Nissan and to a lesser extent Chevy. It isn’t exactly THIS fight, but that fight is coming.
It could be that in the future, we simply tax everyone by miles driven or some formula that includes weight (ton-miles?). But it does behoove us to discuss it now.
The weakness of my argument is that while today’s hybrid/electric vehicles are lighter, there could come a time where the sheer number of batteries in their array increases weight enough to be just as damaging as the traditional gasoline-powered vehicles.
@LG: No passenger vehicle smaller than a bus is damaging the roads. Almost all the damage is done by semi trucks, which weigh 40 tons when loaded. The problem with the electric vehicles is they pay no gas tax at all.
@Mike: I know your position makes you feel better about yourself, but try not to hurt yourself patting yourself on the back. What they “could” do is, like the gas tax, not on the table; your suppositions are just wishful thinking.
You apparently don’t care that the road work would be performed by working people whose wages would stimulate the economy, either. Your “progressive” position is merely a selfish one with a self-righteous veneer.
Not sure where you are in the state, but rt. 1 is one giant roadwork project, much of which is being done so that our tourist can get to the beach without having to wait in line. Also, apparently you have never seen the impact of Amish buggies on roads…and they pay zero gas tax. 🙂
I don’t think anyone disagrees that road work creates jobs and Delaware needs jobs. That’s why passing the infrastructure package last session to fund infrastructure projects was so important last session.
This is what the General Assembly passed last June 30th:
This new law increases 14 fees, which will be used to fund the Transportation Trust Fund, including:
•The motor vehicle document fee is increased from 3.75% to 4.25%.
•The fee for late renewal of a driver’s license is increased from $1.15 to $10
•The fee for late renewal of vehicle registration is increased from $10 to $20.
•The fees for reinstatement of a suspended or revoked driver’s license are increased from $25 to $40 and $143.75 to $200, respectively.
•The fees for issuance of duplicate documents is raised, with the fee for duplicate driver’s license increased from $10 to $20, for duplicate titles from $25 to $50, for duplicate vehicle validation stickers from $1 to $5, and for duplicate registration cards from $2 to $10.
•The fee for a vehicle temporary tag is increased from $10 to $20.
•The fee for sale of driver’s licenses records is increased from $15 to $25.
•The fee to transfer a specific tag number from vehicle to vehicle is increased from $10 to $20.
•The fee to issue a title for a vehicle is increased from $25 to $35.
•The fee for issuance of a lien on an existing title is increased from $10 to $20.
This package was supposed to pay for road work.
http://www.dehousedems.com/press/senate-approves-important-infrastructure-investment-will-create-jobs-improve-economy
House Bill 140, which was backed by all 12 Senate Democrats and received vital Republican support, raises $24 million annually for critical upgrades that will make Delaware’s roads and bridges safer, create good-paying jobs and increase our economic competitiveness with surrounding states. The $24 million will be matched by $24 million in borrowing that ultimately will result in nearly $300 million over the next six years.
So again, my question is why are we contemplating another revenue stream for projects that a revenue stream was created for just a few months ago?
If this was a Republican proposing this, most of the people on here would have steam coming out of their ears because of its disproportionate impact on working class people. That’s what frustrates me about this, Geezer.
That is not the case, Mikem. I, like you, was schooled by Prof. Newton a few years ago on the topic. I followed up on his links and checked the research. I am convinced that it is not regressive.
However, I suggest that you email all of the Republican legislators to tell them that it is regressive. That should get us enough votes to get it passed.
Republicans don’t like value-added taxes because they are a revenue machine and Democrats don’t like them because they are regressive. We will get a VAT when Democrats realize that they are a revenue machine and Republicans realize that they are regressive. – Larry Summers
Chevy Volt’s 100% battery range is 53 miles, which is nearly five times that of the Prius. It also doesn’t require the gas engine to accelerate under normal operating conditions. If I owned one, I would virtually never have to put gasoline in it, ever.
I’d be willing to accept it as part of a package that creates a new tax bracket at the top…it would just make me feel better about it all. lol. In the end, I wouldn’t change my vote based on the issue and frankly, I can afford the small increase…I just wish we’d find some other solutions before defaulting to this one again. The middle class in particular gets kicked around a lot by both parties and with this again are being stuck with a large portion of the bill.
If you don’t think a gas tax is reqressive, try this thought exercise: Suppose the gas tax increases another ten cents every week indefinitely. Which income group will stop driving first?
I’m not sure why this interests me because I support the gas tax increase. I haven’t yet read the Poterba paper but it did give me pause to read this:
Well sure, if you alter the definition of low income you might have a shot at proving the premise. Can a poor family lower its proportion of gas expenditures by taking a cruise vacation or buying expensive jewelery, for example?
But several smart people have wearily said they are convinced, so I guess I’ll read the whole thing one of these days.
@puck–nice try: first, “thought experiment” vs thirty years of research; then cherry-pick a sentence out of the Poterba paper, which was published in 1991, and only represents the first of many, many studies that have approached this from a variety of different perspectives, virtually all of which have come to the same conclusion. Face it, three decades worth of researchers have looked at this, and “common knowledge” or “common sense” in this case is wrong.
@mkem–so let’s get this straight–you are now arguing that at tax must not be merely not statistically regressive to count as “not regressive,” but it must be “not regressive” for the right reasons to count as “not regressive.” Of course wealthier people could make other decisions to reduce their fuel tax liability–anybody can always make decisions to reduce their liability to a specific tax. But the point is that over nearly three decades there is not a shred of evidence that they will make such changes. I’d in general prefer to make policy based on empiricism rather than intentions.
indeed.com (which is an aggregator of job postings) lists 386 open jobs in Delaware with the requirement containing the phrase “must have reliable transportation.”