Untax my Car!
by Fred E. Foldvary, Senior Editor
What evil thing has my car done that it should be so heavily taxed?
The government of the State of California, having fallen into a Grand Canyon sized budget deficit, will this summer hugely increase taxes on cars. The State calls these "vehicle fees," but these payments are imposed by force and have no direct relation to any service, so they are a tax in substance as well as in form. If the car tax is a fee, then so is the income fee and sales fee.
Many California car owners will have to pay two-thirds more to annually register their vehicles. The car tax will be two percent of the vehicle's market value.
There is no moral justification for any tax on automobiles. Merely owning and operating a car does not harm society. Cars are taxed because governments seek to spread taxes to many sources so that people can't figure out how much they are being fleeced. Anyone who owns a car can usually afford to pay for gasoline and maintenance, so government reckons that the owner has an ability to pay more, and the government can extract extra payments.
What relation does the market value of a car have to any government service? None whatsoever. It is reasonable and legitimate to have cars registered and licensed, so that if a car is involved in a collision, we can identify the owner. The owner should pay a fee for this that just covers the cost, and the fee would be the same for all cars, since this has no relation to the car's value.
Pollution is a social cost of driving, which car owners should pay, but instead of letting the price system work, government deals with pollution from cars with a policy of command and control. There are regulations on car engines and gasoline, and many States force owners to have a smog check every couple of years. This adds unnecessary costs to using cars,
The effective remedy for pollution is to make the polluters compensate society for the damage. For cars, this can be effected by putting sensors along streets and highways. The devices would measure the pollutants in the exhaust of cars as they drive by. Cars that exceed a threshold would have their license plates photographed, and the owners would be sent a bill. The technology for this is described in the chapter by Daniel Klein in the recent book Half-life of Policy Rationales: How New Technology Affects Old Policy Issues, which I co-edited with Prof. Klein. The pollution charge would make only the polluters pay a cost, and not penalize car owners whose cars have little or no pollution.
Another social problem caused by cars is congestion. Some people think a gasoline tax is justified in order to reduce congestion as well as pollution. But that taxes cars that are driven in non-congested places and times the same as those that add to congestion. Again, the effective policy is to focus the charge on the problem. Put in tolls that would be just high enough to eliminate the congestion. Half-Life has a chapter on highway tolls by Peter Samuel.
Facing a humongous budget deficit, one would think that the California legislators and governor would be advocating and legislating pollution and congestion charges. These would raise badly needed revenue while eliminating the social costs of pollution and congestion.
But no! The chiefs of government in California are not using the fiscal crisis as an opportunity to shift to morally justified and economically efficient public revenue. There is not a peep from the officials about getting revenue from the rapidly rising value of land. The Democratic-party officials are instead seeking to increase the usual dysfunctional taxes on income, sales, and cars. Some Republican-party legislators are, however, opposed to increasing the car tax, and are seeking to put this to on the ballot of the next election. Good for them!
I support this opposition to the car tax increase. The budget deficit should be erased by cutting government spending and charging those who get subsidized benefits and impose social costs. This crisis should be a splendid opportunity to get public revenue from land value and rent, a source that would not damage the economy, and is morally justified. Those who own land get increased land value and rent from government public works and services, and it is fair and efficient for them to pay back this value received.
If the chiefs of government of California refuse to shift to efficient and morally justified sources of public revenue, then we should not accommodate their political tax malfeasance. Californians should say no! to the increase in the car tax. Car owners everywhere should resist and oppose taxes on cars.
Those who dislike cars should make their case by persuasion rather than force the rest of us to pay for their prejudice. Car owners should not have to any more than the specific social costs of their car use. Those who seek to "get people out of their cars" with punitive taxes on cars ignore the great social benefits from automobiles. Cars empower people by making them individually mobile. People benefit from being able to go places rapidly.
A car tax is really a tax on our precious time and on our investment in a productive capital good. A fiscal crisis does not justify bad taxes when proper revenue sources are untapped. Californians should oppose the car tax increase. Untax my car!
-- Fred Foldvary
Copyright 2003 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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