A Little Numbers Game
Did you know that the federal gas tax, per gallon is 18.4 cents?
ConocoPhillips’ 9 cent profit was right around the industry average last year and wasn’t any larger than that of its competitor, Exxon Mobil. That company just posted a record quarterly profit that has caused Congress to hop into their gas-guzzling SUVs and drive a whole block to grandstand and generally lie about excessive corporate profits.
That means that the government is getting at least twice what the oil companies get every single year. Economics being what it is, those profit margins float up and down depending on the market and the costs the company incurs. The government, on the other hand, is guaranteed 18.4 cents per gallon no matter what.
Does that seem even remotely right to you? It sure as hell doesn’t seem like a good thing at all to me. Does the government need 18.4 cents per gallon?
And before you tell me about how we need that money for road projects, consider one more thing. In 1981 the Federal gas tax was 4 cents per gallon. Have road construction demands gone up so much that we need to collect an additional 14.4 cents? Mind you that when we built our entire interstate highway system, we did it on that 4 cents per gallon rate.
So what extensive road improvements have we made that has necessitated 14.4 more cents per gallon? Have we given more to the states and local governments? Well, maybe we have, but that would make the extra 23.5 cents per gallon my home state of Maryland collects in state and local gas taxes look a bit extravagant. It can’t explain why my state collected that money while it was receiving federal gas tax money and ran a surplus of one billion dollars in 2005.
Obviously, what is excessive when it comes to gasoline prices is the tax rate. But I don’t expect Congress to haul back from that trough anytime soon. They’re too busy mugging for the cameras and figuring out how to spend their own gas tax “windfall”.
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Category: Political Pontifications
The current 18.4 cents tax is really only 8.5 cents in 1981 dollars. So we really only doubled the tax from 1981 until now in real terms. And today's 18.4 cents is 2.6 cents in 1956, when we started building the interstate highway system. If we were to keep the tax the same in real dollars as it was in 1956, we'd be paying 28 cents per gallon now. So, in fact the taxes have gone down substantially. What to we get for it? Think of all those construction projects you have been stuck in. That's the gas tax at work. And guess what? It's not just maintenance. I-95 is still not done in Pennsylvania, which is the reason for the PA Turnpike/I-95 Interchange project. I live in Colorado and the Glenwood Canyon tunnel/viaduct sytem wasn't completed until 1992. Hell, I-70 still doesn't go past Green River, Utah, but they gave up on that one. And we haven't completed our 470 loop project around Denver. Everywhere we go around the US, there is lots of construction on the interstate highway system. And that benfits all of us, unlike oil industry profits.
And what of the construction costs in 1956 dollars? I'd expect that those have remained proportional, if they haven't decreased thanks to better and more efficient tecnhology.
Oil profits do benefit all of us..at least all of us who have any sort of retirement investment.
You know, I was about to look up some numbers on construction costs. But then I realized two things. First, I don't have Nexis-Lexus, so I won't get good numbers. But, more importantly, the quality of construction is much highr than it was only 25 years ago. Comparisons would really be hard to judge. How would you you assess the value of greatly improved safety, for instance? Here's some things I do know. The per unit labor costs have dropped in real terms, while the cost per mile has risen. And safety has been immeasurably improved. Is it still a good deal? Without question. Our 28 cents per gallon buys us the most extensive and safest highway system in the world. Sure, it is not as slick as the Autobahn, but we have lower taxes. And the benefit to us all is irreplaceable. Think of this, if Exxon-Mobil's profits vanished tomorrow, our economy would be fine. I'd lose some money on my stocks, but I would still survive. In fact, our economy was pretty good 7 years ago, when oil profits were lower. But if we took away the interstate highway system, our economy would grind to a halt. I have driven every single interstate highway in the continental US except for I-8. I can tell you that everywhere you go, you will see miilions of dollars of commerce travelling those roads every hour, every day, every year. The scale and effinciency of the system is absolutely stunning. There is nothing like it in the world. Whenever you buy a gallon of gas, that money gets sent to many different destinations, including my pocket. But the best destination is the interstate highway system. By far.
Tom, you get no real argument from me. We ae, I believe, the finest highway system in the world. What I doubt is whether the gas taxes that have steadily increased since 1981 have been wisely spent. I won't ever argue that our interstate highway system is the best destination for those taxes. What I will argue is how much of that has gone to that system. It's obvious that gas taxes get diverted to pay for all sorts of other things and we've generally let that pass us by. Now that we're paying $3 a gallon for gas, we're casting about looking for villans.
I say the chief villains in this particular story work in Congress and they've been bilking us at the pumps for an awfully long time.
I definately agree that the chief villians reside in congress on this one. The main proplem is refinining capacity. The oil companies have the money now to expand that capacity for several years, at least. So why don't they build more refineries? Some blame corporate greed, some blame envirnmental laws. But both are wrong. The oil companies face uncertainty over future demand. They are concerned that they will build more refineries and then congress will increase fuel efficiency requirements. If that happens, the new capacity may not be needed by the time it is completed, and a lot of money will be wasted. It has been a rather long time since the fuel effiancy requirements have been tightened, so oil companies are right to believe they will be changed sometime soon. What congess should have done 3 years ago was tighten the fuel efficiency standards and also passed a real energy bill that establishes a predictable but tightening regulatory climate for the next 20 years. The key word here is predictable. As an engineer, I know almost any regualtion can be overcome with a few years of research. But when regulations keep changing, you may try to meet a regulation that won't exist when you are done. And you may not have done the research to meet regulations that were unexpected. Having a known regulatory future would really help.
I just read a comment about I-70 not going past Greenriver Utah. I don't know where he is from but of course it goes past Greenriver it goes through Richmond and connects with I-15 lok at a map or take a nice drive the mountains are spectacular out that way.
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