The Tax Revenue Problem Caused By Hybrid Cars

We need to wean ourselves off oil and shift away from fossil fuels. The first big step in that battle is the move towards hybrid cars. To the shock of many, people are actually doing it. While this is a good move, the problem is it is creating a tax revenue issue.

Next to filing taxes, one of the things we most like to complain about is paying the every increasing prices at the pump. The cost just seem to go up and up. Yes, we’ve had a pull back on prices with the economic slump, but does anyone believe that prices won’t be going back up? If the brisk sales of hybrids are any indication, the answer is clearly that nobody expects fuel prices to stay low.

Gas prices are not what they seem in many states. According to the Energy Information Administration [yes, there is such a thing], only about 56 cents of each dollar you spend at the pump is for the actual crude oil used to produce the gas. Distribution and marketing costs are included, but a full 20 cents is also devoted to taxes. Taxes? Yes. The vast majority of that tax money goes to the maintenance and repair of federal roads, primarily freeways. At least that is how it supposed to work. Much of the money is diverted to other projects and revenue requirements.

What is clear is the popularity of hybrid cars is actually showing up a the pump. Less fuel is being purchased. That means there is less tax revenue being produced. Now throw in the impact of the economic slow down. Gasoline usage plummeted. That means even less tax revenue. All of this is adding up to a shortage in tax revenues and has politicians looking around for a solution. You know what that means.

How do you produce revenues from something that is being phased out even if it is occurring very slowly? Well, you can try raising the taxes on it, but that will only work for a bit. A better alternative is to think of a different way to tax it. This is exactly what politicians are discussing. They’ve come up with an answer. You might want to sit down for this one.

Politicians want to make up for the tax revenue shortfall by taxing us on the mileage we drive. They would mandate the placement of mileage counters in our vehicles. We would then be taxed on each mile that we drove. Mind you, nobody seems to be suggesting they would pull back on the tax at the actual pump!

The “mileage tax’ would appear to be a politically dangerous proposition. Who would dare offer up this proposal? Well, both parties seem to be coming around to the idea. With tax revenues falling dramatically, it is not a huge reach to imagine this type of initiative being passed on at least a state level and soon.

About the Author

Thomas Ajava writes for – your resource for the latest tax deductions and credits needed to lower your tax bill.

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