Minnesota needs more funding for transportation. Conventional wisdom says “increase the gas tax.” Consequently, Minnesota policy wonks cannot fail to note the revolt in France, described as the worst in 50 years and a threat to the presidency of Emmanuel Macron, triggered by a proposed gas tax increase.
In “Minnesota … must consider rural areas” (Dec. 11), James Lenfestey suggested good ideas — along with conventional wisdom.
But I believe the conventional wisdom is mistaken.
Start at the beginning, around 1920, when the gas tax was enacted. Cars, trucks and paved roads were relatively new. The only major tax was the property tax. It was therefore natural to enact a gas tax dedicated to roads. It remains politically natural, because of inertia (it being difficult to significantly change public systems).
But times change. Minnesota today levies individual and corporate income taxes and a sales tax, as well as the property and gas taxes.
Now consider: The general state sales tax rate is 6.875 percent. The gas tax rate is 28.5 cents per gallon. If gas, including tax, is selling at $2.60 per gallon, the effective rate is 12.3 percent. Thus, compared to other taxable items, gas already is taxed very heavily. Lenfestey suggests a 25-cent increase. That would bump a $2.60 price to $2.85, 53.5 cents of it gas tax — a 23.1 percent effective tax rate.
There is no good reason to tax gas more heavily than other purchases. (Diesel may be an exception due to its being used mainly by heavy trucks, which are much harder on roads and perhaps on the environment than cars.)
That said, I expect disagreement from wonks and others, including elected officials, who are afraid to consider changing big public systems. I expect three arguments: 1) gas tax as user fee; 2) we need to combat global warming; and 3) practical politics.
User fee: The gas tax is a user fee, but ineffective. Drivers of electric vehicles pay little or nothing. Drivers of other vehicles pay wildly varying amounts based on how fuel-efficient their vehicles are, even though all vehicles of any particular weight have the same impact on the roads per mile driven. Heavy trucks probably pay less than the cost of the road damage they cause.
We could get more precise and charge by the mile, but do we really want to go down that intrusive path, which would come down hardest on people whose circumstances require them to drive more?
Why don’t we pay for schools with a head tax on students, paid by their parents? Roads and public transit, like schools and other governmental functions, are public goods appropriately funded out of general public revenues.
All Minnesotans, no matter how much or how little they leave home, benefit from our transportation infrastructure.
Combating global warming: There are better ways than the gas tax, which probably will never be high enough to deter most Minnesotans’ driving. Better approaches include higher motor vehicle sales tax and annual license tab fees for less efficient vehicles; taxing carbon and/or carbon dioxide emissions; congestion pricing of roads to encourage use of public transit and emission reductions; and taxing workplace and/or central city parking along with providing free parking at transit hubs for an expanded transit system.
Moreover, a One Minnesota goal suggests recognizing reality — Minnesota is a big state with a lot of driving needed in rural areas, and we all enjoy economic benefits from encouraging rural residents to visit urban areas and urban residents to go Up North regularly. We should be encouraging carbon-efficient transportation, not trying to reduce driving (other than in urban areas where public transit makes sense).
Practical politics: Big change is hard, but this could be one of those times when it is worth trying. Minnesota’s tax system faces five big challenges — transportation funding; responding to the federal earthquake in the income tax system; the expiring health care provider tax; rising property taxes, and an ineffective high-rate, narrow-base sales tax.
The structural change that could meet all of these challenges simultaneously is broadening the consumer sales tax to cover just about everything, combined with a major rate cut, and a credit to protect lower-income residents against regressivity. The rate probably could be cut from 6.875 percent to 5 percent.
How about gas taxed at 5 percent instead of well over 10 percent (with an increase proposed to well over 20 percent)? Isn’t that a good way to get to One Minnesota? Especially if we would get serious about other, better ways to combat global warming? Might that be politically practical? What do you say, Minnesotans?
John P. James is an attorney who was Minnesota’s commissioner of revenue from 1987 to 1991 under Gov. Rudy Perpich.