REAL-WORLD consequences often overwhelm the utopian schemes of government planners. President Barack Obama's mileage-standard edict provides another example.
During the second presidential debate, Obama bragged that his administration had “doubled fuel efficiency standards on cars.” This means, he said, “that in the middle of the next decade, any car you buy, you're going to end up going twice as far on a gallon of gas.”
We've previously noted significant trade-offs in vehicle construction and safety may be required to meet the 54.5 miles-per-gallon average envisioned by Obama. But there are also other problems.
Should fuel mileage double, fuel tax revenue could be cut in half — and the federal government already struggles to pay the tab for transportation. The federal gas tax is 18.4 cents a gallon and generates $37 billion. But the government spends about $52 billion annually on transportation projects, creating a $15 billion budget hole usually covered by raiding the general revenue fund.
Now some transportation officials are urging that the fuel tax be increased as part of the “fiscal cliff” negotiations, noting the tax has lost a third of its buying power since it was last raised in 1993. A 1-cent increase in the federal gas tax would produce around $1.8 billion; a gasoline tax increase of about 9 cents per gallon might be required to close the current gap.
An Oklahoma Tax Commission report indicates roughly 1.8 billion gallons of gasoline were sold in Oklahoma in fiscal year 2012. An extra 9-cents-per-gallon federal tax would therefore increase Oklahomans' fuel costs by about $169.4 million annually.
But if Obama's fuel standards actually cut consumption by half, the fuel tax might need to be hiked by a far greater amount to cover federal road costs. Money saved by greater fuel efficiency could be lost in part to significantly higher fuel taxes. Furthermore, better fuel efficiency won't necessarily lower fuel consumption. Typically when efficiency increases, people tend to drive more. So consumption could still rise along with fuel taxes.