The Downside of More Miles Per Gallon (Ep. 115)

Our latest Freakonomics Radio on Marketplace podcast is called “The Downside of More Miles Per Gallon.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript here.)

The gist: the Federal gas tax is a primary source of infrastructure funding but, politically, it has proven a hard tax to increase. Furthermore, because the tax is a fixed amount (18.4 cents per gallon) rather than a percentage, gas-tax revenues don’t rise even when gas prices do — as has been happening lately.

Even worse, as modern cars travel further on a gallon of gas (good news, right?), they contribute even less money for the roads they travel. And cars are going to get even more fuel-efficient.

So what’s to be done? Some politicians want to get rid of gas taxes in favor of an increased sales tax — which, Eric Morris argues, is a bad idea, since it shifts the burden to non-drivers.

A more promising idea, under exploration in many areas, is to switch to a tax based on how many miles you drive.

Then there’s the option of fining traffic offenders based not on how badly they were driving but on how much money they earn. If nothing else, this might be a great jobs program, since high earners would have a very strong incentive to hire lots of chauffeurs.

(HT on VMT tax: Kevin Murphy)