115. The Downside of More Miles Per Gallon

The gas tax doesn't work well, and it's only going to get worse. What's next?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:43Stephen J. Dubner?

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• 1:28Stephen J. Dubner?

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• 1:56Stephen J. Dubner?

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• 2:33Speaker 01

  From APM, American Public Media and WNYC,

• 2:39Speaker 01

  this is Freakonomics Radio on Marketplace. Here's the host of Marketplace, Kai Rizdal.

• 2:47Speaker 02

  Time now for a little bit of Freakonomics Radio, that moment in the broadcast every couple of weeks where we talk to Stephen Dubner, the co-author of the books and the blog of the same name. It is the hidden side of everything. Dubner, how you been, man?

• 2:59Stephen J. Dubner?

  Great, Kai, thank you. Been thinking about you. You drive a lot out there in California, right?

• 3:04Speaker 02

  It's LA, baby. Of course we do, yeah.

• 3:06Stephen J. Dubner?

  What are you paying for gas these days?

• 3:07Speaker 02

  Ooh, a lot. It's like it's over four bucks a gallon.

• 3:10Stephen J. Dubner?

  Okay, so people generally don't like that, even though relatively we pay pretty cheap gas. The good news, however, is MPG, miles per gallon. We are now at a point where we get more miles per gallon of gas than any time in history, about 24 miles on average for the US car fleet. And that number, because of federal regulations, is going to go up quite a bit in coming years. So, great news, right?

• 3:34Speaker 02

  Great, yes. Now, what? With you, it's always good news, bad news, dude. What do you got?

• 3:39Stephen J. Dubner?

  Well, let's go a little deeper. If the fuel economy goes up, it means that the cost of every mile you drive goes down. So, people have an incentive to drive more, which can lead to more congestion, more risk of accident. But there's an even less obvious problem than those. Where do we think the money to build and maintain our roads all comes from? Here is Jamie Rall from the National Conference of State Legislatures.

• 4:07Speaker 03

  And right now, the nation relies extremely heavily on gas taxes for transportation funding. And advancements in fuel efficiency pose some real problems for transportation budgets.

• 4:17Speaker 02

  If you follow the logic train here, it's people are using less gas because cars are more efficient and then there's less tax revenues being raised to pay for the road, right?

• 4:25Stephen J. Dubner?

  You got it. Revenues are hurting, but it hurts additionally because the gas tax is such a strange tax. Instead of being a percentage of, you know, whatever, 2%, 5% per gallon, it's a fixed rate. So the federal rate is 18 cents a gallon. States add their own state taxes on, again, a fixed rate. So because it's fixed, unlike, let's say, a sales tax, you don't raise more tax revenue when the price of gas goes up. So every year, what happens is gas tax revenues lose purchasing power.

• 4:57Speaker 02

  All right, so this is one of those gotta ask it questions, even though I know the answer. Why not just raise the gas tax?

• 5:01Stephen J. Dubner?

  It would seem logical. Economists have been, many economists have been lobbying that for years, but politically, for whatever reason, the gas tax is one of these things that is just a no-go zone.

• 5:11Speaker 02

  All right, so find me the Freakonomics way out of this, then.

• 5:14Stephen J. Dubner?

  Let's go down a wrong path first, shall we? I hate to pick on politicians, but the governor of Virginia, Robert McDonnell, has an idea that seems like a pretty bright idea, but most economists would say it's not bright at all. What he wants to do is eliminate the state gas tax in Virginia and make up for those funds by raising the sales tax.

• 5:35Speaker 02

  And that's a bad idea because?

• 5:37Stephen J. Dubner?

  Because a tax is most fair when it hits the people who should pay it but leaves everyone else alone, right? But what Governor McDonnell is doing is flipping that logic.

• 5:49Speaker 02

  All right, so hit me with your plan.

• 5:50Stephen J. Dubner?

  Well, there is a growing movement. I don't know how well this would work, but the idea is this: to tax drivers the way they probably should be taxed, which is per mile driven. So that way, you'd pay the same amount for the roads, whether you're driving, you know, a gas guzzler or an electric car that doesn't use any gas at all. Here's Jamie Rall again.

• 6:09Speaker 03

  At least 18 states have pursued pilot projects, and in the past five years, legislatures in at least 11 states have considered more than 20 proposals to establish or study state-level fees of this kind.

• 6:22Speaker 02

  Yeah, you know what, though? This smacks of Big Brother watching me when I drive, dude, knowing how, where I'm going, right?

• 6:27Stephen J. Dubner?

  People will not like this idea, in many cases, I would say. On the other hand, let me just say this: We've all gotten used to willingly carrying around a GPS device with us at all times, which is what a smartphone does, right? We're also getting used to the ideas of electronic tolling, where we don't have to stop at the booth. So I wouldn't be shocked if we were to see some per-mile taxing in the future. If things get really desperate, if you really need to raise money for roads, we could try what they do in other parts of the world, which is this kind: Traffic fines that are indexed to how much money you actually earn. So in Finland, for instance, if you get a speeding ticket, you're fined about 20% of one month's take-home pay.

• 7:10Stephen J. Dubner?

  So, you know, the speeding fisherman is going to pay a lot less for his ticket than the speeding high-tech boss or radio talk show host, for that matter.

• 7:18Speaker 02

  Yeah, bada-boom. One cautions, though, that this is America, my friend, not Finland.

• 7:25Stephen J. Dubner?

  That's true, not yet, Kai. Check in with me in a couple of weeks, we'll see if we're all looking a little bit more Finnish around the ears, okay?

• 7:32Speaker 02

  Stephen Dubner, Freakonomics.com is the website. We'll see you in a couple of weeks.

• 7:36Stephen J. Dubner?

  Thanks for having me, Kai.

• 7:37Speaker 02

  See ya.

• 7:56Stephen J. Dubner?

  Hey, podcast listeners. Over the past 30 years, women have made huge income gains. So they should be happier, right?

• 8:04Speaker 04

  Women told us that they were happier with their lives in the 70s than men were. So we had a happiness gap, and what we have now is a new gap, where men report greater life satisfaction than women.

• 8:18Stephen J. Dubner?

  On our next episode of Freakonomics Radio, the many ways in which women are not men.

• 8:37Stephen J. Dubner?

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• 9:20Stephen J. Dubner?

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• 10:05Stephen J. Dubner?

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• 10:12Speaker 05

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