In the second debate of the 2014 governor’s race, Mark Dayton made news with his very first question, suggesting for the first time that he would seek an increase in the gasoline sales tax to fund transportation.If we're talking about $6.5 billion, that means $650 million a year. How would that work?
“I would make a specific proposal, including a sales tax on gasoline that will raise close to the $6.5 billion that we’re short in transportation funding over the next ten years,” Dayton said Wednesday night in Moorhead.
Well, let's think about that. How much gas is sold in Minnesota on an annual basis? According to the U.S. Department of Energy, we had daily sales of about 6,316,300 gallons a day in 2013. Here's a screen shot:
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| Gasoline Alley |
If you're going to raise $650 million in revenue on 2.4 billion gallons sold, that works out to be about $0.27 or $0.28 a gallon. That would be on top of the current gas tax in Minnesota, which is now $0.286 per gallon (link is a PDF). So, essentially you'd be looking at doubling the gas tax in Minnesota. Add the current gas federal gas tax of $0.184 per gallon, and you are talking about an effective tax rate of $0.71 per gallon in Minnesota. That's 71 cents for every gallon of gas you put in your vehicle.
How many gallons of gas do you buy per week? I personally put about 15-20 gallons in my car each week and Mrs. D probably puts half that in her vehicle, so we'll say that's about 23 gallons per week in our vehicles. At $0.28 per gallon, that works out to about $6.44/week more in taxes. Annualized out, that's $334.88 a year. Now, we're safely in the middle class, so an extra $334.88 a year is more of an irritation than a major problem. But if you are not making a lot of money, $334.88 is a pretty substantial sum. What can you buy for $334.88? Well, for many families that would be a few weeks of groceries, or the equivalent of a monthly car payment. It's enough money that many people would feel it. And of course, a lot of people in Minnesota use more gas than we do.
The governor claimed that it would be a tax on wholesalers, but that doesn't make a difference at all, since wholesalers would pass the added taxes along in the prices they'd charge to the gas stations, so you'd still be paying for it at the pump.
Not surprisingly, Dayton tried to "clarify" things today, even admitting that hiding the tax through wholesalers wouldn't work:
During Wednesday's gubernatorial debate in Moorhead, Dayton said he'd propose adding "a sales tax on gasoline" if elected to a second term. Dayton told reporters Thursday he should have been clearer that he isn't seeking to boost the per-gallon tax assessed at the pump, but rather a tax at the wholesale level.No kidding, dude. Well, maybe we can use e-pulltabs again. That worked well.
The governor acknowledged such a tax increase would likely get passed down to consumers, and said he's open to other proposals.
8 comments:
CA gas tax is up above 70 cents somewhere, among the highest in the nation. also, CA adds sales tax to the other taxes. sales tax is around 9%. its adds up quick.
dont know if MN adds sales tax to that, but my guess is they do. its an easy way to disguise the true cost of taxes.
Mark, you've got a typo; it's 6316,000 gallons per day, not 3613300 gallons.
And scary that Dayton is not cluing in to the biggest issue with his plan; most Minnesotans live within an hour of state lines, and he'd create a huge incentive to travel for gas, cigarettes, and the like.
Thanks, Bubba. Fat fingers will get ya. And yes, a lot of people would start buying their gas in neighboring states.
And having left the state to get gasoline, they might do some of their other shopping there, too. Seems I remember a HUGE shopping center right across the border in Hudson. Gosh, I wonder why.
the native americans sell cheap smokes all across the nation. maybe they need to open a few gas stations too?
besides taxes, I see no other method on the horizon to support the absurdity known as transportation in our socialist culture. The cost of gas goes up as we waste it, those of us who don't waste it are therefore sponsoring those of us who do. I see that we all choose to waste gas like there is no tomorrow, proof positive that this gas tax will be nothing but a small talking point for the persecuted class.
Road maintenance pays for repairs to roads caused by cars driving over them. That damage is a linear function of distance driven, and a non-linear function of the weight of the vehicle (heavy vehicles cause much more damage). If we wish to charge people/vehicles according to the damage they cause to the roads, the sensible approach is to multiply the annual mileage by a non-linear function of a vehicle's weight representing damage cost per unit mile and weight.
In contrast, charging a gas tax suffers from a few things. First, the gas tax has failed to keep pace with prices. Second, gas taxes no longer serve as an adequate stand-in for road use. The tax paid by the motorist is only somewhat correlated to the road damage that the motorist causes. Cars are becoming increasingly fuel-efficient. Because the point of the tax is to maintain the roads in good repair.
Taxing mileage and weight is a much more economically efficient and sensible solution.
I'd argue for the gas tax, actually. It's collected from a few thousand gas stations instead of a few million drivers, and it drives all the right behaviors--efficiency, driving when you need to, etc..
Problem is that the state has been collecting a lot of taxes from drivers (e.g. motor vehicle sales tax) and giving it to ecological disasters like transit. Reverse that, and charge buses a road tax (because they are, unlike my pickup, doing a disproportionate amount of road damage), and let's see where things lie.
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