ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Is Raising Gasoline Taxes Fiscally Conservative

Updated on January 12, 2019
Rock_nj profile image

I enjoy writing about a wide variety of topics that draw upon my decades of life experiences. I hope you enjoy reading my articles.

Is Raising Gasoline Taxes Fiscally Conservative

Vintage Gasoline Pump
Vintage Gasoline Pump

What Does Fiscally Conservative Actually Mean?

Is raising taxes fiscally Conservative? This article takes a look at this issue from a different angle.

Raising taxes has become a highly charged political issue in the United States in recent years. While nobody likes to have their taxes raised, there are situations in which raising taxes is actually the fiscally conservative approach to financing government services and can save a great deal of money in the long run.

There is general agreement in American society that government has a legitimate role in building and maintaining transportation infrastructure, such as roads and mass transit systems. The questions that must be resolved is how much publicly financed transportation infrastructure does society want to build and maintain and how will the construction and maintenance of the transportation infrastructure be paid for in a fiscally responsible manner?

Is Raising Gasoline Taxes Fiscally Conservative | Pay Now or Pay More Later

Libertarians may argue that government has no business building or maintaining transportation infrastructure and such activities should be done exclusively by private entities. That is fine if you want to have a tollbooth on every street that you travel on to pay a private entity for the use of their private roadway; most people would find that extremely cumbersome and unworkable in our modern society that relies upon moving people and goods around quickly. That debate is beyond the scope of this article and moot since the vast majority of Americans support government involvement in building and maintaining transportation infrastructure, and such support is unlikely to change in a society that values its freedom of movement without the hindrance of stopping to pay tolls. They call highways without tolls “freeways” for that very reason. Also, collecting revenue via tolls is very inefficient and expensive when compared to a motor fuels “gas tax” collection system that is done invisibly at the gas pump and paid by the retailers of motor fuels, such as gasoline and diesel.

I will use the State of New Jersey as an example regarding why raising motor fuel taxes and paying for transportation infrastructure construction and maintenance up front is the fiscally conservative approach. Due to decades of borrowing in the bond markets to pay for transportation infrastructure construction and maintenance, New Jersey is currently paying nearly $900 Million per year from state motor fuel taxes and transportation fees just to pay off transportation bond debts that the state ran up in past decades. None of the money that New Jersey currently collects for transportation infrastructure construction and maintenance is used for its intended purpose. The nearly $900 Million collected by the state in gasoline and other fuel taxes for transportation infrastructure projects is instead being used entirely to service past bond debts.

If New Jersey had paid for transportation infrastructure construction and maintenance projects over the past few decades up front on a “pay as you go” basis via gas and fuel tax increases, when necessary, instead of borrowing to pay for them in the bond markets, the state would now have nearly $900 Million more per year to pay for transportation infrastructure projects. In other words, if past state governments in New Jersey were fiscally conservative and paid for transportation infrastructure projects up front rather than borrowing for them and saddling future generations with the payment of their debts (which is now), the state would have at least $900 Million more per year to dedicate to these projects. That is an astounding amount of money when the total amount of money the state of New Jersey spent on transportation infrastructure construction and maintenance projects in 2011 was $1.6 Billion. In percentage terms, 56% of the money New Jersey currently requires for transportation infrastructure construction and maintenance projects is instead being used to service the debt of past transportation bond issues. This annual shortfall in money for transportation projects is made up by even more borrowing in the debt markets; a situation that is snowballing into a large and unsustainable debt burden.

The motor fuels tax “gas tax” in New Jersey is currently 10.5 cents per gallon. That is the third lowest gas tax in the United States. The gas tax in New Jersey has not been increased since 1988. Back in 1988, gasoline was selling for approximately $1.00 per gallon, so the gas tax as a percentage of a gallon of gasoline was approximately 10%. With gasoline currently retailing for approximately $3.35 per gallon, the same 10.5 cents per gallon is only slightly more than 3% of the cost of a gallon of gasoline in New Jersey. If New Jersey’s gas tax was a percentage of the price of a gallon of gasoline over the years since 1988, instead of a fixed 10.5 cents per gallon, there would be plenty of money to pay for transportation infrastructure construction and maintenance projects on a pay as you go basis and very little, if any, need for borrowing to pay for transportation infrastructure.

New Jersey has dug itself into such a deep debt hole that it would take a 15 cents per gallon increase in the New Jersey gas tax to make up for the nearly $900 Million being used to service the past transportation bond debt. While a 15 cents per gallon increase in the New Jersey gas tax sounds large, it would only bring New Jersey up to the same gas tax rate as neighboring New York, and New Jersey would only be in the middle of the pack in comparison to the gas tax levies that other states impose. Also, as a percentage of a gallon of gasoline, New Jersey’s 25.5 cents gas tax would be 7.6% of the cost of the cost of a gallon of gasoline at current gasoline prices; well below the percentage that was paid in 1988.

Think of Paying With Cash Versus Debt on a Personal Level

Nobody would argue that personally paying for everything on a credit card until all of one’s income is used to pay for interest on the credit card makes any sense from a personal fiscally conservative point of view. The same fiscally conservative principal applies to states that need to finance necessary transportation infrastructure projects to keep people and goods moving and their economies healthy. Paying for things up front is always cheaper then financing them, no matter if you are an individual or a large government body like a state. Is raising gasoline taxes fiscally conservative? Since do so would reduce or eliminate the amount of state borrowing and future bond interest payments, the answer is "yes".

How to Pay For Transportation Projects

What Is The Fiscally Conservative Approach to Paying for Transportation Projects?

See results

Gov. proposes raising gas tax revenues to ease transportation woes

© 2011 John Coviello

Comments

    0 of 8192 characters used
    Post Comment
    • KenDeanAgudo profile image

      Kenneth C Agudo 

      6 years ago from Tiwi, Philippines

      Here, we used to import lots of fossil fuel and when they sell it in our country it fluctuates. Lots of protesters always.

    • Rock_nj profile imageAUTHOR

      John Coviello 

      8 years ago from New Jersey

      Thanks HSchneider. I didn't find a way to work it into my article above, but I believe one of the reasons that New Jersey has relied on expensive bonding for transportation infrastructure rather than paying for it up front is the lucrative campaign contributions that bonding firms give to both political parties. There are big fees to be made on underwriting and selling state bonds. Unfortunately, the residents of New Jersey are getting the short end of the stick, as we are still paying for infrastructure projects that were done decades ago, some of which are badly in need of repair. Too bad we don't have the money to repair them because it's being used to pay off the bonds.

    • profile image

      Howard Schneider 

      8 years ago from Parsippany, New Jersey

      You are right on target Rock. I live in NJ also and I know the residents love the lower gas prices. But our roads are in a state of disrepair. The bond issues to fill the transportation hole are also horrible and the interest is sucking up budget money. We need higher gas taxes but no one on either side of the aisle have the political courage to do it. It's also needed to force us to wean ourselves off gas and oil. They are ruining our environment and making us much too reliant on the Middle East. Thank you for writing this and speaking truth.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)