A smart gax tax for South Carolina


Rankin's Grocery

The “Net Zero” gas tax

Thirty years ago, conservative columnist Charles Krauthammer proposed a revenue neutral gasoline tax to reduce consumption. To keep revenue neutral, he tied his proposed gas tax increases to a dramatic reduction in the payroll tax equal to the average tax paid nationwide.

For example, if the average American contributes $4000 annually toward’s Krauthammer’s dramatically higher gas tax (on the order of a dollar per gallon), then every taxpayer gets a $4000 tax rebate.

Krauthammer writes:

The whole idea is to reward those who drive less and to disadvantage those who drive more. Indeed, inequities of this sort are always introduced when, for overarching national reasons, government creates incentives and disincentives for certain behaviors. A tax credit for college tuition essentially takes money out of the non-college going population to subsidize those who do go–and will likely be wealthier in the end than their non-college contributors. Not very fair. Nonetheless, we support such incentives because college education is a national good that we wish to encourage. Decreased oil consumption is a similarly desirable national good.

Krauthammer, a critic of environmental regulation and global warming theory, believes his “net zero” gas tax would have several benefits. He points out people will naturally be encouraged to drive less and to either buy higher mileage cars or even to use alternate forms of transportation. Profits that now flow to multinational oil corporations stay in the local economy. Krauthammer believes his net-zero consumption tax will do more for transit ridership and clean air than decades of environmental regulations and CAFE standards have accomplished.

Retired Republican Senator Richard Lugar supports the net-zero gas tax, as does petroleum engineer Robert Rapier.

Gas tax and rebate for South Carolina

And now, South Carolina Republicans B.R. Skelton (a retired economist from Clemson) and Doug Brannon have introduced House Bill 3498 to their state House of Representatives. Instead of the dollar tax long promoted by Krauthammer, Skelton and Brannon propose a modest 10 cent hike in the user fee charged for all motor fuels. The bill also requires the state to adjust this fuel user fee every six months based on the change in the price of motor fuels.

10 cents might appear low, but it’s a 60% increase over the current 16 cents per gallon and brings South Carolina from the third lowest gas tax in the nation up to the 11th highest.

The 3.6 million registered vehicles in South Carolina burn about 470 gallons of fuel each year. Assuming no change consumption, this 36 cent gas tax will cost the taxpayer about $170 per year. To offset the pain of the increased tax, registered vehicle owners will get a partial rebate: $26 per vehicle in 2013, and $53 per vehicle in subsequent years.

This isn’t quite the same as Krautammer’s proposal: the South Carolina bill is meant to increase funding to repair South Carolina’s crumbling roads while sticking it to visiting out-of-staters who take advantage of South Carolina’s low gas tax. It’s a little unfortunate that the rebate applies only to those who own a car, but I think it’s a good start. HB 3498 seems to have gotten a decent reception so far. If South Carolina Republicans can pass this tax and rebate package, perhaps it can get the ball rolling for this idea in other states too.

Photo: “Rankin’s Grocery” in Anderson, South Carolina by Robert S. Donovan. Creative Commons Some Rights Reserved.

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