Should You Buy an Electric Car?

Random Thoughts on Electric Cars

"Tesla unveiled its new Model 3 sedans, starting at $35,000, in a ceremony on Friday night [July 28] on the grounds of its sprawling assembly plant and research facility outside San Francisco.

-- Bill Vlasic, "In Pivotal Moment, Tesla Unveils Its First Mass-Market Sedan," New York Times, July 30, 2017, p. A1

Reading the Times story about Tesla's ceremony and first "sale" (to employees) of 30 Tesla Model 3 electric cars, my thoughts accelerated back to my first experience driving an electric car a couple years ago. [Photo credit: Tesla Motors.]

It wasn't a Tesla. It was a Nissan Leaf. I wanted to experience driving an electric car more than I wanted to buy one -- although that was both a possibility and the dealer's wish.

It was a very nice driving experience. There was no reason not to have one because of that drive.

Ultimately, analysis led me to conclude that although it might make no sense for my wife and me, I could imagine people for whom an electric car could be a wise purchase.

Meanwhile, here are some other random thoughts as well.

Environmental impact. Face it, the only forms of transportation that come close to environmental purity would be: walking, bicycling, horseback riding, moving through the air in a glider, or over water with a sailboat.

The operation of an all-electric vehicle may have substantially less adverse environmental impact than operating an internal combustion engine. But if the electricity came from a coal-fired power plant, and a lot of electricity was lost while in transit to your community, the difference is less dramatic.

Then there's the batteries -- a lot of batteries -- the China-controlled rare earth elements it takes to make them, and what happens to them in landfills when they need be replaced. ("Most electric car batteries use lithium nickel manganese cobalt oxide (NMC) cathodes and graphite anodes. 'Rare earth' metals dysprosium, neodymium and terbium, chiefly mined in China . . . are used in some electronic components of the motor." The Electric Car Revolution Is Making These Investors Very Optimistic," Reuters/Fortune, October 4, 2016.)

Convenience. However wonderful the act of driving an electric car may be, there are limits to how far and where you can drive one.

Gasoline filing stations are everywhere -- except in the dead of night in sparsely populated areas of the country. Charging stations for electric cars are not (yet) as available.

At this time, few would want to set off on a cross-country trip in an electric. Even with a probable range "up to" (as the cable companies say about megabits per second) 100 to 200 miles (depending on the make/model), to avoid being stranded without a sufficient charge you would want to allow margins of error when starting out on more than short trips around town.

And instead of filling your tank with gas every week or so, building a home charging station, and going through the routine of starting the charging process every night, would approximate the ever-present obligation of a dairy farmer to milk the cows every evening.

Buy or lease? For me, cars are just transportation, not collectors' items or bragging rights. As long as a car is reliable and safe, I've never cared how old it was or what it looked like. So I've never before calculated the comparative benefits of buying or leasing new cars.

But when considering the Leaf, my initial analysis was that leasing would make the most sense.

Why? Internal combustion engines, properly maintained and worked on, can operate for 250,000 miles or more. There are ways to extend (or curtail) the life of batteries, but they will need to be replaced at some point -- life and price data are not yet definitive, but five years and $5000 might be examples. "[B]attery replacement costs is one of three key considerations why 57 percent of Americans cited in a USA Today/Gallup Poll say they wouldn’t buy an EV." Jim Motavalli, "Replacing EV Batterries: Your Costs Will Vary," PlugInCars.com, June 19, 2012.

Of course, that was five years ago. The technology, and pricing, are still evolving.

It's hard to compare the cost of buying with leasing because there are so many variables. But the financial differences are usually not wildly dramatic.

Bottom line: leasing means you'll always have the latest of the rapidly evolving technology, have some additional guarantees and servicing from the dealer, and never need to spend thousands of dollars on a fresh set of batteries.

Borrowing from the TV pharmaceutical commercials,"Ask your doctor if an electric car might be right for you." So what made me decide to forgo the fun of leasing an electric car?

(1) Little or no need for any car. My wife and I are retired and live in Iowa City, Iowa -- which I sometimes refer to as a "toy town." The law school is a three-or-four-block walk from home. One of the nation's largest research hospitals is closer still. The Big-10 football in Kinnick Stadium is one block further. The dental school maybe three blocks beyond that. Going "to town" is almost exactly one mile, a 15 or 20-minute walk (often quicker than the total time, including parking, to use a car). I mostly get around by bicycle and walking. We already have one car each that mostly sit in the driveway, both old and purchased used.

(2) Need for internal combustion car. We would still need a car capable of distances beyond the range of an electric -- not only for cross-country trips, but for much of our travel within the state, or for two-day trips to places without charging stations.

(3) In order for the lease to make any kind of economic sense for us it would need to be driven distances as close as possible to the maximum permitted under the lease agreement (before there are additional per-mile charges). I was not sure that even using it for all of our around-town driving would come anywhere close to that.

"You began by saying, 'I could imagine people for whom an electric car could be a wise purchase.' So, whom might they be?"

I'm not thinking of those who say, "If you have to ask the price you can't afford it;" the people for whom "money is no object." They can buy any electric they want, regardless of how much they use it, run around in it for six weeks or six months, or until their name comes up on Tesla's backlog list of 500,000 potential buyers who've paid $1000 each to stand in line -- at which point they can give the first electric car to one of their kids.

No, here's who I had in mind. A young couple, with or without kids, both of whom have steady jobs that require daily commutes. They are wealthy enough to buy new cars, but not wealthy enough to consider a $100,000 Tesla.

One of those commutes is, say, 60 miles a day (round trip), or other distance well within the car's range on a full charge (so as to avoid any risk of being stranded). If that was not enough to approach the maximum allowed mileage under the lease, the electric could also be the car of choice for any running around town.

The closer the leased electric could get to that maximum mileage the more economic sense it would make to have the car. (Of course, like most electrics owners, they would need to build a charging station in their garage and remember to charge the car every evening.)

Their other car, new or used, could be a fuel efficient gasoline car. It would be used for the other partner's daily commute, any cross-country (or local) trips beyond the range of the electric, and for local errands once the electric had reached its budgeted monthly mileage.

And that's what I think about electric cars.

# # #

Gas Tax Critics: A Response

December 10, 2013, 9:38 a.m.

What's the Alternative?

In two blog essays and one newspaper column I have advocated that we get on with the business of tending to our deteriorating roads and bridges -- and that we continue to use the gasoline tax as a way of funding the projects. "Paying By The Mile Is A Terrible Idea," Sept. 25, 2013; Nicholas Johnson, "Think Long and Hard Before Diluting the Gasoline Tax," Iowa City Press-Citizen, Dec. 5, 2013, p. A7; "Gasoline Tax Is Our Friend," Dec. 5, 2013.

There are, of course, those who disagree with this approach. Sometimes I have responded, online when the comments are made in response to a newspaper's online article, or as appended remarks to the three items linked above. Because I continue to believe these are important issues, and those who seek to enter into a dialogue are entitled to some kind of response, I have reproduced, and added to, my responses in this new blog essay.

I'll begin with a Letter to the Editor in this morning's [Dec. 10] Press-Citizen regarding my Dec. 5 Press-Citizen column, linked above.

Taxpayers Aren't Getting Enough Bang for Their Buck
Steve Hufferd, Iowa City
Iowa City Press-Citizen, Dec. 10, 2013, p. A7
On Dec. 5, while advocating an increase in gasoline taxes, Nicholas Johnson makes the typical liberal error in assuming that increasing taxes will cure all the ills in the infrastructure. He would, I'm sure, say the same regarding taxes to fund education even while taxes spent on education has accelerated even while academic performance per student has plummeted.

We conservatives have no problem with taxes per se. The problem we have is with the plethora of irresponsible abuses of the public coffers. Where is the evidence that the gasoline taxes collected over the past half century has been spent wisely? A bit of transparency would be appreciated and might have a positive effect on the public resistance to tax increases. Of course, transparency could also work against any prospect of tax increases. With the public trust of government officials reaching new lows, it's not the best of times for politicians to be saying, "trust me with an increase in tax dollars."

Tax payers do not feel they are getting sufficient "bang for the buck." There are ways of getting big jobs done with very little. It's called management. The best example of the lack of it has been the current launching of Obamacare.

_______________
Steve Hufferd might be surprised to find the degree to which I agree with him -- as explained in these italicized comments, below:

I don't think that "increasing taxes will cure all the ills in the infrastructure [or] education." I don't recall ever saying that "the gasoline taxes [have] been spent wisely." (As a local school board member I often made the point in meetings, and newspaper columns, that some reforms both cost less and produce better results. As Hufferd puts it, "there are ways of getting big jobs done with very little.")

As a public official, and as a one-time administrative law professor, I have advocated more, not less, transparency in government.

I agree that "trust of government officials [is] reaching new lows" and that "trust me" no longer works.

I certainly share his commitment to better "management" -- and have ever since my term as U.S. Maritime Administrator during the mid-1960s (and throughout my term as a school board member). During President Lyndon Johnson's Administration we actually had a "War on Waste" program that saved taxpayers billions of dollars. (My contribution was working to reduce maritime subsidies.) Johnson symbolized the program by walking around the White House turning off needless lights -- thereby earning the nickname of "Lightbulb Lyndon." (I agree with Hufferd's criticism, and have said, that the rollout of Healthcare.gov was a classic example of poor management and oversight. "Exclusive: Insider Explains Healthcare.gov Fiasco; From 'Integration Testing' to 'Full End-to-End Testing,'" Nov. 2, 2013.)

So where do we part company?

(1) We have transportation needs. Unsafe bridges and deteriorating roads need to be fixed.

(2) There are limited options. (a) Continued crumble. We could continue to let the roads and bridges crumble, and build more detours around them. (b) Private ownership. We could sell them off to for-profit corporations -- with the tolls for driving far exceeding any gasoline taxes. (c) Different taxes. We could keep the roads public, but use different taxes: sales, property, or income -- shifting the entire burden away from the "user fee" and on to everyone. (d) Gas tax. We could continue to pay with the user fee called the gasoline tax -- hopefully, while applying Hufferd's and my focus on triage and "do we really need it," innovative cost-cutting, sound management, oversight, and increased transparency.

(3) Gas tax preference. Of these options, my preference is (d), Gas tax -- for reasons laid out in the Press-Citizen column, "Think Long and Hard Before Diluting the Gasoline Tax," Dec. 5. (Admittedly, non-drivers also benefit from our road network; thus, while I would not advocate some modest funding from income tax revenue, it would be difficult to argue persuasively against it.)

(4) We're all at fault. No institution (or individual) is free of the kind of inefficiencies, waste and abuses Hufferd and I would like to remedy -- whether corporations, the military, schools and universities, hospitals, non-profit organizations, religious institutions -- even political parties and their candidates' campaigns. It is misplaced to suggest that most of the fault, when it comes to government, falls on liberals or conservatives or libertarians or greens. Some are more willing to overlook waste in the military (billions of dollars in Iraq and Afghanistan that can't be accounted for); others less likely to come down on popular social programs. Corporate executives of companies dependent upon government contracts may complain about taxes, while spending millions on lobbyists and campaign contributions to get special tax breaks and other special interest benefits in return. (I've run numbers on the "return on investment" from campaign contributions. It's between 1000-to-one and 2000-to-one; give one million, get back one billion -- in the form of such things as contracts, tax breaks, antitrust exemptions, tariffs and other price supports.)

Local constituents, and their elected officials who campaign on reducing taxes, are among the first to squeal when a local defense contractor may lose a lucrative contract because the weapons system it's profiting from isn't wanted by the Pentagon, or just doesn't work.

So I don't think it is accurate, fair, or constructive to try to address these problems by demonizing one political party, or political movement, over another. On that Hufferd and I really do disagree.

Of course we don't want to pay for "bridges to nowhere" (a one-time Republican proposal), and we do want to have efficient and effective management of such necessary maintence projects as we may have, selected under rational systems of priority. Having said that, we're still left with the issue of how to pay for them. For the reasons I've outlined, I continue to believe the gasoline tax is the best way to do it.

Here are some additional criticisms -- and my responses.

The first two comments, below, appear on the Patch reference to the Sept. 25, 2013, blog essay, referenced immediately above. The next four were comments on the Editorial, "Gas Tax Increase StillBest Option Left Standing," Iowa City Press-Citizen, Dec. 1, 2013.

My responses, in italics, follow each.

Johnny Johnson December 03, 2013 at 05:46 PM Hey why not? Energy prices consume a far greater share of income from middle class than the rich. Make those working fools cough up more and skip lunch to pay for it.

Johnny Johnson (no relation) is, of course, correct: as a percentage of their income, the poor and middle class pay more for gasoline (and its tax) than the rich. (And this disparity is exacerbated by the poor often having to rely on older, low gas mileage cars in less good condition, and possibly longer commutes.) But this could also be said about everything else in the marketplace (e.g., food, clothing, automobiles, housing, fines for speeding) -- with the exception of various discounts offered to "seniors" and very young children (categories not directly related to income) and public subsidies for food and housing for the poor. In my opinion, the most effective and easily administered solutions are to raise the minimum wage to "living wage" levels in the private sector, and get closer to full-employment policies by making the government the employer of last resort in the public sector -- rather than to single out the gasoline tax as a single item. -- N.J.

Brian December 04, 2013 at 07:16 PM The State needs to cut costs, not raise revenue. Do the inefficiencies bother anyone else? Look at how many times I-80 has been redone Between Dodge Street & Coral Ridge last 10 years. What about the insane waste of money to replace the barrier between East & West with a "stained faux rock face". That was 1,000,000/mile. Just the labor to haul the existing barrier away required over 100 semi tractor trailers. Did anyone notice the stain faded in ONE WEEK? It wasn't UV stable. The State should be able to fund projects with existing gas tax.

Here again, Brian may be right (I'm not familiar with his facts). Everything possible should be done by those managing projects -- whether private sector or public sector -- to do jobs as efficiently and effectively as possible, at the lowest cost consistent with the necessary quality. Clearly, this is not a problem limited to public projects -- think about the BP Gulf oil rig disaster, the Massey Coal Mine disaster, the millions of cars and other products (including food) that must be recalled. But if we are going to continue to have a highway network that is smooth and safe we are going to have to continue to spend money on it. Trying to insure that money is spent as efficiently as possible is an essential goal; cancelling all highway projects because some are unwise or wasteful is not an option. -- N.J.

[I was one of those who commented on the Press-Citizen's editorial:] Nicholas Johnson · Top Commenter No one questions the need for roads and bridges in sufficiently good condition that cars and trucks can move safely and at reasonable speeds. Few question that public construction, maintenance and funding is preferable to for-profit corporate ownership and operation. The only remaining issue is what is the best formula for raising sufficient revenue -- and most fairly allocating the burden among Americans. As today's editorial explains, the gasoline tax wins that one hands down. For even more discussion of the reasons why, along with additional benefits of this approach, see "Paying By The Mile Is A Terrible Idea; The Gasoline Tax Is Our Friend," http://fromdc2iowa.blogspot.com/2013/09/paying-by-mile-is-terrible-idea.html December 2 at 7:49am

Mike Thayer · Follow · Top Commenter · Works at Coralville Courier This is intellectually lazy thinking by the PC. It's easy to say, "Raise taxes." But the REAL answer is finding areas in other state government spending where $215 million can be cut and re-allocated to roads/infrastructure. December 2 at 8:49am

Here again, I agree that everything possible should be done to evaluate taxpayer-funded federal, state, county, and city projects. Are they worth doing at all? What's the benefit-cost analysis? Those that have public support, still make sense, and that return multiples of what they cost should probably receive more money than they presently get. Some are probably funded at a more or less appropriate level. Those that have outlived their usefulness should be investigated further to see if they should be closed out. To put the cost of highway maintenance on all Iowa taxpayers -- rather than just those who drive and buy gas -- is, of course, an option, and one that some people in addition to Mike Thayer are advocating. For the reasons laid out in the column that begins this blog essay, I believe the multiple benefits and rationale for funding roads from a gasoline tax is a better option. -- N.J.

Lynn Griebahn Jr. · Top Commenter · University of Iowa Yes! someone needs to be the adult here, democrats NEVER think about the waste in spending, December 2 at 11:21am

As a wise wag once put it, "'Always' and 'never' are two words we should always remember never to use." Some Democrats and Republicans seem to care more about wise use of public money than other Democrats and Republicans -- a bloated defense budget, earmarks and tax breaks for special interests. Members of both parties seem somewhat reluctant to specify which specific programs they would eliminate. Indeed, they are so fond of suggesting that the elimination of "waste, fraud and abuse" will solve our budget challenges (when of course, however desirable, that's not the magic solution) that it's always seemed to me they think and talk about "waste" (in general) rather than "projects value" (in particular) far more than they should. -- N.J.

Michael Hoback · Top Commenter The feds are also considering raising their gas tax using the same plea as Iowa. The DOT has used the same claim of shortfalls, every legislative session for at least the twenty years I have been paying attention. The fact is that if you gave them every tax dollar in the state they would still want more. December 4 at 10:45am

On the assumption this is true, it is a call for oversight and better management -- something I certainly support. The more we can conduct a triage among potential road building and repair projects by engineers on the basis of rational analysis and professional judgment, and the less we can rely on politicians choosing projects on the basis of contractors' campaign contributions and short term construction jobs for their constituents, the better. -- N.J.

The following comment was posted to the online version of my Dec. 5 Press-Citizen column:

Michael Hoback · Top Commenter
Your opinion sounds very reasonable but bitter experience demonstrates that increased taxes only fuels bigger government. December 6 at 3:18pm

My response would be similar to many of those above. See, e.g., my numbered paragraphs (1) through (4) in the response to Steve Hufferd's Letter, at the top of this blog essay, and to Mr. Hoback's other comment, immediately above this one.

_______________
And my son, Sherman, has sent the following comment regarding this blog essay by email:

If you do a follow-up you might touch on 2 related topics:

1) Tolls and HOT lanes (aka "Lexus Lanes").

2) Gas tax refunds/credits for poor and working class folks, as well as those who must drive lower mileage vehicles and/or long distances out of necessity.

WRT #1 -- tolls and Lexus lanes are grossly regressive and, I would say, un-American. Since when do we segregate users of public infrastructure into the "haves" and "have-nots"? Our parks, libraries, and schools are available for everyone to use and enjoy. The same used to be true of our public roads and Interstate highway system. Not any more. Now it's 'pay up or shut up'.

Charging an extra fee or toll to use certain lanes on a public road -- particularly an exorbitant per mile 'HOT lane' charge that is admittedly _designed_ to keep out the 'riff-raff' (aka the 99%) -- is outrageous. Our highways are not some exclusive private dinner club. They should be open for ALL to use. Ordinary folks who cannot afford to pay the fees should not have to sit in traffic for hours and breathe exhaust fumes while the wealthy speed past them in their German luxury sedans. If the infrastructure is inadequate it should be improved. HOT/Lexus lanes are an elitist band-aid, and one that takes pressure off of legislators to actually _do_ something about roads with inadequate capacity. If the rich & powerful can buy their way out of traffic jams then they'll be happy and not press for road improvements.

OT/Lexus lanes are the equivalent of having two (2) sections in public libraries and/or schools. One section of the library for the well-healed who can afford to pay a user fee with shiny new computers and an extensive collection of books, comfy chairs, plenty of staff, etc, and the other just a bare-bones barely adequate room with old slow computers and maybe some box fans instead of A/C in the summer. Or a school split into two sections -- one with some classrooms that have a new computer for every kid, a teacher for every 10 students, and an indoor olympic size swimming pool vs. another section with classes of 30+ and some old textbooks on the other side of the building -- for the unwashed masses, the kids from poor and working class families.

Tolls and Lexus lanes are completely unacceptable. They are immoral and should be eliminated. Raise the gas tax instead.

2) Of course, even the motor fuel tax is regressive. Some people _must_ drive long distances. They aren't out joy riding, they have no choice. Out here in the D.C./Baltimore area (and most other major metro areas) people do not usually choose to live 30-50 miles from where they work -- it is the only way they can afford to live. People do not always have the money to buy a new (or used) car that gets 40 mpg. Maybe a relative gave them an old sedan that gets 18-20 mpg and they can barely afford the maintenance on it. Many farmers and ranchers must drive big pickup trucks and have no choice but to drive long distances. The same with construction workers, etc. You get the idea. It is not right to punish them for situations which are beyond their control.

Everything being equal -- income, required driving distance, vehicles needed -- then this would be easier. If no one really had to drive at all, or, say, no more than 10 miles per day, and everyone could afford an electric car, hybrid, or ultra-high mileage car that would suit their needs, then slamming them with a big fat fuel tax for driving a full-size crew cab dually pickup truck with a huge V-8 gas-sucking engine -- 'just because', for the "image" -- would make perfect sense.

Unfortunately it's not that simple.

Perhaps the gas tax should be set up like our income tax system (only simpler). The IRS recognizes that $50k/year is not the same from one person to the next. Some people have legitimate business expenses that are deductable for good reason. For example, it would not be fair to tax an independent cab driver on the entire amount he/she earns (their gross income), because they have to pay for fuel, maint., repairs, and license fees out of that. Likewise, it does not seem fair to a) have a flat tax (which the gas tax kinda is) and b) not allow any deductions for lower income folks and those who absolutely must drive long distances and/or lower mileage vehicles.

I rest my case. ;-)

_______________
This morning [Dec. 11] I discovered this Baltimore Sun editorial on the subject. It's not critical of the gas tax, quite the contrary. But I thought it sufficiently well reasoned to be worth adding here:

Editorial, “The Toll On America; With the nation's transportation network ailing, raising the federal gas tax for the first time in 20 years is the best available remedy,”
Baltimore Sun, Dec. 5, 2013; The Gazette, Dec. 11, 2013, p. A6.
Ah, to be in the U.S. economy of 1990s, a decade when the gross domestic product grew by about one-third and unemployment dropped from 7.5 percent to 4 percent. In 1993, the federal government raised the tax on gasoline to 18.4 cents per gallon, an increase of more than 30 percent from the previous year, and business boomed.

Since then, the cost of a gallon of unleaded gasoline has more than doubled, yet the per-gallon federal excise tax has remained unchanged. States have raised their fuel taxes to keep up as best they can with local transportation needs, but the federal government's source of revenue has stagnated, a problem worsened by the fact that people are driving less and using more fuel efficient vehicles.

The result? The Highway Trust Fund has run dry, and the nation's transportation infrastructure has suffered. To simply keep up with basic needs, Congress has been forced to supplement it with billions of general tax dollars — money that might have otherwise been used to pay down the debt, offset sequestration cuts or fund other myriad priorities.

In the House this week, a bill was introduced that would raise the tax by 15 cents per gallon. That would, more or less, allow the tax to at least keep up with inflation (falling a bit short as a percentage of fuel costs). It has been endorsed by AAA, and it's a safe bet that many in the business community, in the labor unions and local government would like to see it approved as well. Reducing congestion and keeping up the transportation network is vital to the economy.

Yet it's also safe to assume the bill has absolutely no chance in the GOP-controlled chamber. So inviolate is their no-tax pledge that conservatives would rather see the nation's economy wither than be caught raising a tax that is so obviously in need of updating.

This is a classic case of cutting off one's nose to spite one's face. Critics can point to transportation dollars that have been wasted, allegedly, on projects that are under-used or built too elaborately or required their contractors to pay their workers a living wage. But collectively, such waste (and we use that term loosely since many of these complaints are misplaced) is negligible, even microscopic, compared to the enormous transportation needs.

According to the American Society of Civil Engineers, the U.S. needs to invest about $2.7 trillion in transportation and other infrastructure by 2020 if the nation is to remain globally competitive. Yet the federal trust fund has become so depleted that experts say it won't be able to meet existing obligations in 2015, let alone take on new projects.

To leave the next generation a pot-hole strewn, overcrowded and unworkable transportation system would be as disastrous and as economically crippling as any budget deficit. And, as history has demonstrated, raising fuel taxes does not kill jobs. Indeed, most industrialized nations tax fossil fuels at a much higher rate.

One can argue that in the future, the U.S. must gravitate toward a system of financing transportation that is not so dependent on gas taxes, perhaps one that taxes by miles traveled instead of fuel consumed. As a recent U.S. Public Interest Group report notes, Americans are driving less and depending on public transportation more — yet we don't have the resources to accommodate this transition.

It's also reasonable to look for more public-private partnerships and other creative ways to finance airports, ports, highways, trains, light rail and other modes of travel in the future. But that is not nearly enough. The bottom line is that the country is already falling behind, and realistically, raising the federal gas tax must be part of the equation.

Would raising the tax also increase the cost of fuel? Absolutely, but that's not necessarily a bad thing. As studies have shown, getting stuck in traffic is even more costly, and Americans are doing a lot of that these days. As a recent Texas A&M Transportation Institute study found, congestion is already costing the average American an extra $818 per year. As distasteful as raising gasoline costs may sound, it's a lot better than the alternative of neglecting the roads, bridges and rails — or expecting some other miracle to come along.

_______________

Gasoline Tax Is Our Friend

December 5, 2013, 7:30 a.m. (And see --> "Gas Tax Critics: A Response," Dec. 10, 2013 <--.)

Think Long and Hard Before Diluting the Gasoline Tax
Nicholas Johnson
Iowa City Press-Citizen
December 5, 2013, p. A7

As children, we used to sing "London Bridge Is Falling Down." That was fantasy. We'd never heard of a bridge falling down.

Now we have.

Why won't Gov. Branstad advocate an increased gas tax?

No one questions the need for safe, smooth roads and bridges.

Few question public ownership and maintenance. It sure beats private ownership by profit-maximizing corporations.

The only remaining issue? How to pay for it? As an earlier [Dec. 2] Press-Citizen editorial explained, the gasoline tax wins that one hands down.

We'll either pay for roads and bridges or we won't have them. But for a gasoline tax to pick up the tab, it must take account of inflation and current needs.

Politicians who run and vote against "government," encourage the notion taxes are evil. Taxes are just another way to buy stuff we need - like roads. Taxes are often the most efficient and equitable way to pay.

Proposed alternatives, such as the mileage tax or using other State funds, are little more than a shell and pea game to enrich the oil and automobile industries.

The gas tax is a "user fee." The more you drive, the more gasoline you buy, the more tax you pay, and the more you contribute to the maintenance of the roads you use.

There are many reasons why the gasoline tax is not creating enough revenue. Mostly it's the failure to adjust for inflation.

But it's also a good news, bad news story. The good news: the price of gas (with its tax) stimulates (1) higher gas mileage cars and trucks, (2) hybrids, and (3) electric vehicles (along with some other alternatives) -- all of which use less gas per mile than cars when the tax was last set.

As a result, we are both emitting fewer greenhouse gases, and less dependent on foreign oil.

The bad news: the less gas we use, the less gas tax revenue, the less money we have for roads and bridges.

So why not abandon, or supplement, the gas tax? Because doing so reduces the marketplace incentives for better gas-mileage vehicles. Raising the tax increases those incentives.

For example, paying tax by the mile (instead of by the gallon) there's no tax incentive not to drive a spiffy Hummer (some models get 9 mpg in city) or inefficient old vehicles. You'll still pay the mileage fee, and more per mile for gas, but no additional gas tax.

Grim reality: we'll either pay for our paved roads or go back to driving on the dirt roads of my youth. Road maintenance costs are more than before. One way or another we're going to pay. That's not the issue. Increasing gas taxes is not an additional outlay that could have been avoided; it's just the best way of paying for it.

My proposal?

Continue to fund road and bridge construction and maintenance with gasoline taxes. Raise the tax rate to whatever's necessary.

Give the more efficient, alternatively-fueled vehicles the gas tax advantages of better gas mileage. Provide what's needed by any new, socially beneficial technology when trying to change culturally embedded habits (such as battery recharging stations for electrics). This is similar to the boost we gave everything from the railroads to the Internet during their early years.

Once the alternative vehicles industries are profitable enough, design any one of a number of possible approaches for collecting a road user fee from them as well.

But, please, think long and hard before abandoning, or diluting, the gasoline tax. Let's not wake up to discover that, "You don't know what you've got until it's gone."
_______________
Nicholas Johnson teaches at the University of Iowa College of Law and maintains www.nicholasjohnson.org and FromDC2Iowa.blogspot.com.

# # #
Note: For an earlier, lengthier, and slightly different take on this subject, see "Paying By The Mile Is A Terrible Idea," September 25, 2013. For the positions of critics of this position see below.

# # #
There are, of course, those who disagree with this approach. The first two comments, below, appear on the Patch reference to the Sept. 25, 2013, blog essay, referenced immediately above. The next four were comments on the Editorial, "Gas Tax Increase StillBest Option Left Standing," Iowa City Press-Citizen, Dec. 1, 2013.

My responses, in italics, follow each.

Johnny Johnson December 03, 2013 at 05:46 PM Hey why not? Energy prices consume a far greater share of income from middle class than the rich. Make those working fools cough up more and skip lunch to pay for it.

Johnny Johnson (no relation) is, of course, correct: as a percentage of their income, the poor and middle class pay more for gasoline (and its tax) than the rich. (And this disparity is exacerbated by the poor often having to rely on older, low gas mileage cars in less good condition, and possibly longer commutes.) But this could also be said about everything else in the marketplace (e.g., food, clothing, automobiles, housing, fines for speeding) -- with the exception of various discounts offered to "seniors" and very young children (categories not directly related to income) and public subsidies for food and housing for the poor. In my opinion, the most effective and easily administered solutions are to raise the minimum wage to "living wage" levels in the private sector, and get closer to full-employment policies by making the government the employer of last resort in the public sector -- rather than to single out the gasoline tax as a single item. -- N.J.

Brian December 04, 2013 at 07:16 PM The State needs to cut costs, not raise revenue. Do the inefficiencies bother anyone else? Look at how many times I-80 has been redone Between Dodge Street & Coral Ridge last 10 years. What about the insane waste of money to replace the barrier between East & West with a "stained faux rock face". That was 1,000,000/mile. Just the labor to haul the existing barrier away required over 100 semi tractor trailers. Did anyone notice the stain faded in ONE WEEK? It wasn't UV stable. The State should be able to fund projects with existing gas tax.

Here again, Brian may be right (I'm not familiar with his facts). Everything possible should be done by those managing projects -- whether private sector or public sector -- to do jobs as efficiently and effectively as possible, at the lowest cost consistent with the necessary quality. Clearly, this is not a problem limited to public projects -- think about the BP Gulf oil rig disaster, the Massey Coal Mine disaster, the millions of cars and other products (including food) that must be recalled. But if we are going to continue to have a highway network that is smooth and safe we are going to have to continue to spend money on it. Trying to insure that money is spent as efficiently as possible is an essential goal; cancelling all highway projects because some are unwise or wasteful is not an option. -- N.J.

[I was one of those who commented on the Press-Citizen's editorial:] Nicholas Johnson · Top Commenter No one questions the need for roads and bridges in sufficiently good condition that cars and trucks can move safely and at reasonable speeds. Few question that public construction, maintenance and funding is preferable to for-profit corporate ownership and operation. The only remaining issue is what is the best formula for raising sufficient revenue -- and most fairly allocating the burden among Americans. As today's editorial explains, the gasoline tax wins that one hands down. For even more discussion of the reasons why, along with additional benefits of this approach, see "Paying By The Mile Is A Terrible Idea; The Gasoline Tax Is Our Friend," http://fromdc2iowa.blogspot.com/2013/09/paying-by-mile-is-terrible-idea.html December 2 at 7:49am

Mike Thayer · Follow · Top Commenter · Works at Coralville Courier This is intellectually lazy thinking by the PC. It's easy to say, "Raise taxes." But the REAL answer is finding areas in other state government spending where $215 million can be cut and re-allocated to roads/infrastructure. December 2 at 8:49am

Here again, I agree that everything possible should be done to evaluate taxpayer-funded federal, state, county, and city projects. Are they worth doing at all? What's the benefit-cost analysis? Those that have public support, still make sense, and that return multiples of what they cost should probably receive more money than they presently get. Some are probably funded at a more or less appropriate level. Those that have outlived their usefulness should be investigated further to see if they should be closed out. To put the cost of highway maintenance on all Iowa taxpayers -- rather than just those who drive and buy gas -- is, of course, an option, and one that some people in addition to Mike Thayer are advocating. For the reasons laid out in the column that begins this blog essay, I believe the multiple benefits and rationale for funding roads from a gasoline tax is a better option. -- N.J.

Lynn Griebahn Jr. · Top Commenter · University of Iowa Yes! someone needs to be the adult here, democrats NEVER think about the waste in spending, December 2 at 11:21am

As a wise wag once put it, "'Always' and 'never' are two words we should always remember never to use." Some Democrats and Republicans seem to care more about wise use of public money than other Democrats and Republicans -- a bloated defense budget, earmarks and tax breaks for special interests. Members of both parties seem somewhat reluctant to specify which specific programs they would eliminate. Indeed, they are so fond of suggesting that the elimination of "waste, fraud and abuse" will solve our budget challenges (when of course, however desirable, that's not the magic solution) that it's always seemed to me they think and talk about "waste" (in general) rather than "projects value" (in particular) far more than they should. -- N.J.

Michael Hoback · Top Commenter The feds are also considering raising their gas tax using the same plea as Iowa. The DOT has used the same claim of shortfalls, every legislative session for at least the twenty years I have been paying attention. The fact is that if you gave them every tax dollar in the state they would still want more. December 4 at 10:45am

On the assumption this is true, it is a call for oversight and better management -- something I certainly support. The more we can conduct a triage among potential road building and repair projects by engineers on the basis of rational analysis and professional judgment, and the less we can rely on politicians choosing projects on the basis of contractors' campaign contributions and short term construction jobs for their constituents, the better. -- N.J.

The following comment was posted to the online version of my Dec. 5 Press-Citizen column:

Michael Hoback · Top Commenter
Your opinion sounds very reasonable but bitter experience demonstrates that increased taxes only fuels bigger government. December 6 at 3:18pm

And this letter to the editor strikes a similar theme:

Taxpayers Aren't Getting Enough Bang for Their Buck
Steve Hufferd, Iowa City
Iowa City Press-Citizen, Dec. 10, 2013, p. A7

On Dec. 5, while advocating an increase in gasoline taxes, Nicholas Johnson makes the typical liberal error in assuming that increasing taxes will cure all the ills in the infrastructure. He would, I'm sure, say the same regarding taxes to fund education even while taxes spent on education has accelerated even while academic performance per student has plummeted.

We conservatives have no problem with taxes per se. The problem we have is with the plethora of irresponsible abuses of the public coffers. Where is the evidence that the gasoline taxes collected over the past half century has been spent wisely? A bit of transparency would be appreciated and might have a positive effect on the public resistance to tax increases. Of course, transparency could also work against any prospect of tax increases. With the public trust of government officials reaching new lows, it's not the best of times for politicians to be saying, "trust me with an increase in tax dollars."

Tax payers do not feel they are getting sufficient "bang for the buck." There are ways of getting big jobs done with very little. It's called management. The best example of the lack of it has been the current launching of Obamacare.

Steve Hufferd might be surprised to find the degree to which I agree with him.

I don't think that "increasing taxes will cure all the ills in the infrastructure [or] education." I don't recall ever saying that "the gasoline taxes [have] been spent wisely." (As a local school board member I often made the point in meetings, and newspaper columns, that some reforms both cost less and produce better results. As Hufferd puts it, "there are ways of getting big jobs done with very little.")

As a public official, and as a one-time administrative law professor, I have advocated more, not less, transparency in government.

I agree that "trust of government officials [is] reaching new lows" and that "trust me" no longer works.

I certainly share his commitment to better "management" -- and have ever since my term as U.S. Maritime Administrator during the mid-1960s (and throughout my term as a school board member). During President Lyndon Johnson's Administration we actually had a "War on Waste" program that saved taxpayers billions of dollars. (My contribution was working to reduce maritime subsidies.) Johnson symbolized the program by walking around the White House turning off needless lights -- thereby earning the nickname of "Lightbulb Lyndon." (I agree with Hufferd's criticism, and have said, that the rollout of Healthcare.gov was a classic example of poor management and oversight.)

So where do we part company?

(1) We have transportation needs. Unsafe bridges and deteriorating roads need to be fixed.

(2) There are limited options. (a) Continued crumble. We could continue to let the roads and bridges crumble, and build more detours around them. (b) Private ownership. We could sell them off to for-profit corporations -- with the tolls for driving far exceeding any gasoline taxes. (c) Different taxes. We could keep the roads public, but use different taxes: sales, property, or income -- shifting the entire burden away from the "user fee" and on to everyone. (d) Gas tax. We could continue to pay with the user fee called the gasoline tax -- hopefully, while applying Hufferd's and my focus on triage and "do we really need it," innovative cost-cutting, sound management, oversight, and increased transparency.

(3) Gas tax preference. Of these options, my preference is (d), Gas tax -- for reasons laid out in the Press-Citizen column, "Gasoline Tax Is Our Friend," Dec. 5. (Admittedly, non-drivers also benefit from our road network; thus, while I would not advocate some modest funding from income tax revenue, it would be difficult to argue persuasively against it.)

(4) We're all at fault. No institution (or individual) is free of the kind of inefficencies, waste and abuses Hufferd and I would like to remedy -- whether corporations, the military, schools and universities, hospitals, non-profit organizations, or religious institutions. It is misplaced to suggest that most of the fault, when it comes to government, falls on liberals or conservatives or libertarians or greens. Some are more willing to overlook waste in the military (billions of dollars in Iraq and Afghanistan that can't be accounted for); others less likely to come down on popular social programs. Corporate executives of companies dependent upon government contracts may complain about taxes, while spending millions on lobbyists and campaign contributions to get special tax breaks and other special interest benefits in return. (I've run numbers on the "return on investment" from campaign contributions. It's between 1000-to-one and 2000-to-one; give one million, get back one billion -- in the form of such things as contracts, tax breaks, antitrust exemptions, tariffs and other price supports.)

Elected officials who campaign on reducing taxes -- and their local constituents -- are among the first to squeal when a local defense contractor may lose a lucrative contract because the weapons system it's profiting from isn't wanted by the Pentagon, or just doesn't work.

So I don't think it is accurate, fair, or constructive to try to address these problems by demonizing one political party, or political movement, over another. On that Hufferd and I really do disagree.

Of course we don't want to pay for "bridges to nowhere" (a one-time Republican proposal), and we do want to have efficient and effective management of such necessary maintence projects as we may have, selected under rational systems of priority. Having said that, we're still left with the issue of how to pay for them. For the reasons I've outlined, I continue to believe the gasoline tax is the best way to do it.

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And my son, Sherman, has sent the following comment regarding this blog essay by email:

If you do a follow-up you might touch on 2 related topics:

1) Tolls and HOT lanes (aka "Lexus Lanes").

2) Gas tax refunds/credits for poor and working class folks, as well as those who must drive lower mileage vehicles and/or long distances out of necessity.

WRT #1 -- tolls and Lexus lanes are grossly regressive and, I would say, un-American. Since when do we segregate users of public infrastructure into the "haves" and "have-nots"? Our parks, libraries, and schools are available for everyone to use and enjoy. The same used to be true of our public roads and Interstate highway system. Not any more. Now it's 'pay up or shut up'.

Charging an extra fee or toll to use certain lanes on a public road -- particularly an exorbitant per mile 'HOT lane' charge that is admittedly _designed_ to keep out the 'riff-raff' (aka the 99%) -- is outrageous. Our highways are not some exclusive private dinner club. They should be open for ALL to use. Ordinary folks who cannot afford to pay the fees should not have to sit in traffic for hours and breathe exhaust fumes while the wealthy speed past them in their German luxury sedans. If the infrastructure is inadequate it should be improved. HOT/Lexus lanes are an elitist band-aid, and one that takes pressure off of legislators to actually _do_ something about roads with inadequate capacity. If the rich & powerful can buy their way out of traffic jams then they'll be happy and not press for road improvements.

OT/Lexus lanes are the equivalent of having two (2) sections in public libraries and/or schools. One section of the library for the well-healed who can afford to pay a user fee with shiny new computers and an extensive collection of books, comfy chairs, plenty of staff, etc, and the other just a bare-bones barely adequate room with old slow computers and maybe some box fans instead of A/C in the summer. Or a school split into two sections -- one with some classrooms that have a new computer for every kid, a teacher for every 10 students, and an indoor olympic size swimming pool vs. another section with classes of 30+ and some old textbooks on the other side of the building -- for the unwashed masses, the kids from poor and working class families.

Tolls and Lexus lanes are completely unacceptable. They are immoral and should be eliminated. Raise the gas tax instead.

2) Of course, even the motor fuel tax is regressive. Some people _must_ drive long distances. They aren't out joy riding, they have no choice. Out here in the D.C./Baltimore area (and most other major metro areas) people do not usually choose to live 30-50 miles from where they work -- it is the only way they can afford to live. People do not always have the money to buy a new (or used) car that gets 40 mpg. Maybe a relative gave them an old sedan that gets 18-20 mpg and they can barely afford the maintenance on it. Many farmers and ranchers must drive big pickup trucks and have no choice but to drive long distances. The same with construction workers, etc. You get the idea. It is not right to punish them for situations which are beyond their control.

Everything being equal -- income, required driving distance, vehicles needed -- then this would be easier. If no one really had to drive at all, or, say, no more than 10 miles per day, and everyone could afford an electric car, hybrid, or ultra-high mileage car that would suit their needs, then slamming them with a big fat fuel tax for driving a full-size crew cab dually pickup truck with a huge V-8 gas-sucking engine -- 'just because', for the "image" -- would make perfect sense.

Unfortunately it's not that simple.

Perhaps the gas tax should be set up like our income tax system (only simpler). The IRS recognizes that $50k/year is not the same from one person to the next. Some people have legitimate business expenses that are deductable for good reason. For example, it would not be fair to tax an independent cab driver on the entire amount he/she earns (their gross income), because they have to pay for fuel, maint., repairs, and license fees out of that. Likewise, it does not seem fair to a) have a flat tax (which the gas tax kinda is) and b) not allow any deductions for lower income folks and those who absolutely must drive long distances and/or lower mileage vehicles.

I rest my case. ;-)

_______________

Paying By The Mile Is A Terrible Idea

September 25, 2013, 9:00 a.m. (And see, "Gas Tax Critics: A Response," Dec. 10, 2013.)

The Gasoline Tax Is Our Friend

Don't it always seem to go
That you don't know what you've got
Till it's gone
-- Joni Mitchell, "Big Yellow Taxi"

As children we used to sing "London Bridge Is Falling Down." It involved a land far away, a fantasy, because none of us had ever heard of a bridge actually falling down.

Now we have.

We're told many of Iowa's bridges are in need of replacement or repair -- including our own Park Road bridge over the Iowa River. Roads, too, are crumbling and in need of replacement.

It all costs money. How to pay for it? For years it's been paid for with the federal and state gasoline taxes. Today "tax" is one of our few three-letter dirty words. Political rhetoric permits a discussion of "taxes" disconnected from a consideration of what we buy with them. Taxes are, after all, just another way of buying stuff we need -- like roads and bridges. Paying nothing for roads and bridges is not an option. One way or another we'll either pay for them or we won't have them. But in order for the gasoline tax system to work, the taxes need to be raised to a level that recognizes both inflation and current need for funds. Politicians who have convinced their constituents that taxes are evil are reluctant to do this, and are looking for alternatives.

Current proposals to substitute a kind of mileage tax, or toll road, for gasoline taxes are, unfortunately, gaining favor. Before these ideas go much further, it's time to explain why they are little more than a shell and pea game designed to further enrich the oll and automobile manufacturing industries.

One of the primary virtues of the gasoline tax is that it is what's called a "user fee." The more you drive on the roads, the more gasoline you'll buy, the more gasoline tax you'll pay, and the more you'll contribute to the building and maintenance of the roads you use. Unlike the railroads that must pay the whole cost of building and maintaining their roadways, the trucking companies have all of us pitching in to build their roadway system. [Photo credit: multiple sources.]

Ah, say the mileage fee advocates, but under our proposal the amount paid by drivers would also be tied to their usage.

To which I reply, "Yes, but . . .." Yes, but look at all we give up in the process. Abandoning the gasoline tax system, as Joni Mitchell reminds us, is going to leave us with the realization that we didn't know how good we had it before it disappeared.

Crumbling roads and falling bridges are not our nation's, and our state's, only challenges. (1) All Iowans, but especially our farmers, are discovering what "climate change" means in our day-to-day lives and business operations. We need to do everything possible to reduce our use of fossil fuels. (2) And, to the extent our dependence on fossil fuels will continue, we want to become as energy independent as possible. When "our oil" somehow gets beneath the sands of Middle Eastern countries, it costs us trillions of dollars, and thousands of lives, for our military to go get it out for us.

There are many reasons why the gasoline tax is not creating the revenue we need to keep an adequate vehicular infrastructure up to snuff. Mostly it's the failure to raise it to the levels required by inflation.

But it's also a good news, bad news story. You want the good news first? OK.

There are three other factors at play. (1) Higher gas mileage cars and trucks, (2) hybrids, and (3) electric vehicles (along with some other alternatives) all use less gas per mile than the averages when the gasoline tax was put in place. As a result, we are both (a) putting less volume of greenhouse gases into the environment than we otherwise would be, and (b) are less dependent on foreign oil supplies. There are many motivations and forces that support the growing interest in these three alternatives to low mileage cars and trucks, but a major one is the price of gas (including the gasoline taxes).

That's the good news. The other side of that coin is that, notwithstanding the benefits of our using less gasoline, the less gas we use the less revenue the gasoline tax produces, the less money we have for roads and bridges.

So why not substitute a mileage charge? There are many reasons. But whether you eliminate the gasoline tax, reduce it, or hold it at present levels, one consequence is that doing so reduces the marketplace incentive to produce and purchase better gas-mileage vehicles, including hybrids and electrics -- which is something we should want to encourage, not discourage.

By raising the gasoline tax to the levels necessary to maintain our road and bridges infrastructure we can actually increase the incentive to fuel efficiency.

It is difficult to change an entire nation's culture and habits -- as we have seen with tobacco use. But note that, in that case, we used all of Larry Lessig's four options for modifying human behavior (law, norms, market, architecture). We have laws that prohibit smoking in some places. The norm is that smokers ask permission to smoke in your presence (or simply refrain from doing so), rather than assuming it is of course OK, because, after all, "everybody smokes." And convenience stores have moved the cigarettes behind the counter, where they are more difficult for teenagers to steal (an "architectural" change). But one of the biggest factors has been a marketplace modification: teenagers are much less likely to take up smoking at $7.00 per pack of cigarettes than at $2.00.

When you pay by the mile, you can drive as low mileage a vehicle as you want -- a spiffy Hummer (some models get 9 mpg in city) or an inefficient old vehicle. You'll still pay more per mile for the gas, but at least you won't be paying a tax on top of that to maintain your roadway.

Another disadvantage to the mileage charge is the sheer administrative complexity of operating such a system, with its much wider array of possible fraudulent evasions than available with the gas tax.

My proposal? Continue to fund road and bridge construction and maintenance with gasoline taxes. Raise the tax rate to whatever level is necessary to do that. Continue to give the more efficient, and alternatively-fueled, vehicles the advantage needed by any new, socially beneficial technology when trying to change culturally embedded habits and (in the case of electrics' need for battery recharging stations) infrastructure. (That is, the advantage of paying less, or no, gasoline tax -- similar to what we've done during the early years of the Internet.) Years from now, when the alternative vehicles industries, and their necessary infrastructure, have crossed the threshold that make them sufficiently popular and profitable to stand on their own, design any one of a number of possible approaches for collecting a road-maintenance contribution from alternatively fueled vehicles.

But, please, think long and hard before adding, or substituting, a mileage fee system for the gasoline tax. Let's not wake up to discover that, "You don't know what you've got until it's gone."

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