Rachel WestonPA 395 Green TaxPaper #2Gasoline Tax and Motor Vehicle Purchase and Use TaxIn the state of Vermont, gasoline is taxed at a rate of twenty cents per gallon. Of this, nineteen cents is a gasoline tax and one cent is a Petroleum Distributor License Fee. Money from this tax and fee is earmarked for specific funds. Of the nineteen cent gasoline tax and one cent fee, it was distributed, up to July 1, 2004, as follows:Allocation of Gasoline Taxes and Fees Before 7/1/04 Cents per gallonTransportation Fund 15.205Education Fund 3.04DUI Fund 0.38Fish & Wildlife Fund 0.375Petroleum Clean Up Fund 1Total 20(Table 1)The gasoline tax was raised by four cents per gallon to its current nineteen cents per gallon rate in 1997 as a way to “offset property tax reductions that fund education” (Hausauer, 30) On July 1, 1999 the four cents per gallon that went to the Education Fund was reduced to three cents per gallon with the remainder going to the Transportation Fund. After July 1, 2004 there is a change in the way that gasoline tax is to be allocated. No money from the gasoline tax will be allocated to the Education Fund. This is due to Act 68 which creates a “simpler education funding system” by shifting local sales taxes to homestead and nonresidential property taxes. (Act 68) Act 68 does not state directly that gasoline taxes no longer are needed for the Education Fund. The Joint Fiscal Officehas provided this information. The money that had been allocated to the Education Fund will now go to the Transportation Fund (see Table 2) Allocation of Gasoline Taxes and Fees after 7/1/04 Cents per gallonTransportation Fund 18.245Education fund DUI Fund 0.38Fish & Wildlife Fund 0.375Petroleum Clean Up Fund 1Total 20(Table 2)Analysis:Ease of administration:The Gasoline tax is extremely easy to administer. The charge of the tax is reflected in the cost per gallon of gasoline. Consumers take the cost of gasoline to includethe tax. When a person fills up their car at the pump and pays, the tax money is paid along with their purchase much like the sales tax. There is no filing of receipts or paperwork to fill out for the consumer. Environment:According to Pigouvian concepts this tax should encourage resource conservation and pollution prevention. The gas tax is a tax on an external cost, in this case, pollution (though it could be many things, such as potholes). The gasoline tax could be designed to use market forces to achieve an efficient allocation of resources. This just isn’t the case. According to research done, the gasoline tax has not discouraged use of gasoline at all. Infact, the numbers show that gasoline consumption has steadily increased by fourteen percent between 1995 and 2004. In 1995 the total revenue from gasoline tax was approximately $47.1 million. In 2004 the total revenue was $71.4 million. The tax isadministered on a per gallon basis and is therefore not influenced by the rising or falling price of oil. Therefore, any annual rise in tax revenue is due to either a rise in the tax rate,such as happened in 1997 with a four cent increase, or due to increased usage of gasoline.In 1995 approximately 314 million gallons of gasoline were sold. In 2004 this number increased to approximately 357 million gallons. Clearly the gasoline tax is not having a reductive effect on gasoline consumption.Why would gasoline consumption increase in Vermont even though the price of gasoline has increased due to the state tax? It is because the gasoline tax in Vermont is largely a perverse tax. Seventy six percent of the revenue from the gasoline tax goes into the Transportation fund. The transportation fund is used largely to maintain and build roads, highways, bridges, and the general transportation infrastructure. The revenue is being used to make it easier for people to drive their cars. In effect, the more gasoline people buy, there will be more revenue in the transportation fund to build and maintain roads, so people will drive more often because it is “easier”, and therefore they will buy more gas. The cycle is self perpetuating. This is not an exponential process though, in enough time there will be a leveling off of the amount revenue collected due to the fact that drivers won’t be driving more miles every year because there are more roads. The gasoline tax is also perverse because through its allocation to the transportation fund, it gives proportionately less money to endeavors of rail and public transportation systems (which in effect would lower emissions) than it gives to automobile oriented transportation structures thus creating an enticing market for automobiles.The tax does take into effect gasoline’s effect on human health in two small but not insignificant ways. First, the revenue from the one cent Petroleum Distributor fee goes directly to the Petroleum Clean Up fund. This fund provides money for the clean up of leaking petroleum storage tanks. Leaking tanks can leach into wells, backyards, farms, forests, or whatever else is within a few miles of the leaky tank. This can have a negative effect not only on human health, but on the plants and animals that live in the ecosystem around the tank. The clean up fee is a good green tax. The tax does not prevent such leaksfrom occurring, but it does earmark money specifically for cleaning up the pollutive messthat can and will occur when leaks spring. Second, some of the tax revenue goes to the Fish and Wildlife Fund, which is maintained by the Department of Natural Resources. The construction and presence of roads can impact wildlife and fish negatively. Roads and especially highways can create barriers to wildlife migratory patterns. The increase ofnoise and activity can scare animals or lead to anxiety. Also particulate emissions from vehicles on roads near sources of water can settle into the water and affect fish health. Though I am unclear how the Fish and Wildlife fund uses its money, I do believe that it isfor the protection and maintenance of Vermont’s species. In this sense, the money earmarked for the Fish and Wildlife Fund is a good green tax.The other place that revenue from the gasoline tax is allocated to is the DUI fund (driving under the influence.) Prevention of driving under the influence may slightly lower the amount of emissions from those potential drivers, but for the sake of this analysis, I must say that it is insignificant. The purpose of the DUI fund is green tax neutral; it does not
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