A Dozen Northeastern States Plan To Impose A Gas Tax By Another Name

A gasoline tax by any other name is still a tax on gasoline, isn’t it? That’s the question the governors of a dozen Northeastern states are attempting to avoid by implementing what is effectively a new gas tax on consumers via a regional “cap and trade” system.

The concept at hand in this regional gas tax scheme is similar to every other “cap and trade” system devised in any free economy, which involves the politicians trying to hide the tax from consumers by placing the point of taxation upstream, in this case with gasoline wholesalers. The Politico story linked above reveals that fact in the following paragraph:

For the average consumer, the program will function fundamentally as a gas tax, as fuel wholesalers paying for emissions allowances pass on those costs. But policymakers prefer the term "cap-and-invest," and argue that the benefits of greening the transportation system will limit the cost impacts and keep energy dollars in the region. 

Everyone involved knows that those wholesalers will pass along those costs to consumers, but the vast majority of consumers will never understand why the cost of filling their cars suddenly went up. They’ll just see a higher cost at the pump and - conveniently, for the governors involved - most will just blame it on that evil conspiracy by “big oil” to make those “windfall profits.”

Note that the developers of this new tax are now even trying to avoid the use of the standard “cap and trade” terminology, preferring instead the much more touchy-feely “cap and invest” label. The “invest” part of that refers to the ostensible plan by the dozen states to take the money received from this new regional gasoline tax and use it to pay for stuff like “mass transit, electric-vehicle charging and other transportation infrastructure.”

That all sounds great, but whether or not “investments” in such projects actually happens will most likely be left up to future politicians, unless the ultimate final agreement among these dozen states includes strict sideboards limiting how each can spend its new source of funding. In this country, it is a rare governor indeed who is willing to allow 11 of his or her peers to dictate how his or her state can spend a significant new revenue stream.

So, basically what we see happening here is the same sort of effort to raise gasoline prices at the pump via public policy that has been repeatedly employed by the government of California over the last several decades, a topic I wrote about earlier this month. The dozen states involved - Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont, Virginia, New York, Maine and New Hampshire - are simply adopting the California tactics to drive up gasoline prices on a regional basis, which really amounts to just another way to hide the ball from consumers.

To be clear, this is not a partisan effort: The governors of those 12 states include 8 Democrats and 4 Republicans. I should also point out that I have no fundamental objection to raising the gasoline tax in order to help pay for infrastructure improvements or expansions. In fact, I’ve long advocated that the federal gas tax, which has not been raised in more than a quarter of a century as the nation’s road and bridge infrastructure has become dangerously dilapidated, should be increased to meet constantly-growing funding needs.

The gasoline tax is the classic, direct user fee, one that places the burden of funding road maintenance and improvements on those who use the roads. It is fair to point out the reality that, if the federal government had consistently raised the gasoline tax over the years in order to meet the needs of the road system, gas prices at the pump would already meet or exceed the levels desired by the activists who push these deceptive “cap and invest” schemes designed to hide the taxing ball.

We can debate the merits of taking either approach all day long, but at least directly raising the gasoline tax would be an honest approach. Instead, we see states like these twelve spending tens of millions of dollars and years upon years studying and developing deceptive approaches like this in order to give governors and other politicians the political cover they need to still be re-elected after voting the new, hidden tax into law.

This is boiling the consumer frog, plain and simple, and frankly, it stinks.