As the headlines will tell you, Americans are driving less these days. But should you care? Absolutely.
While the drop in demand is good news for future petroleum pricing, it
spells bad news for federal and state budgets that rely on income from
gasoline taxes to pay for public infrastructure projects like road and
bridge repair.
According to the U.S. Department of Transportation, Americans
drove 12.2 billion miles less in June than they did a year earlier. Undoubtedly, the decrease stems from the elevated cost of gasoline, which was up over a dollar since 2007.
The decline in miles driven represents the eighth straight month that Americans have opted to keep their cars in park more frequently. Since November 2007, Americans collected drove 53.2 billion miles less than they did the previous year, a decline slightly greater than the one which occurred during the 1970s oil crisis.
The federal government collects 18.4 cents for every gallon of gasoline purchased. If we assume the average vehicle on the road yields 20 miles per gallon, the fed stands to lose about $500 million in tax revenues. Likewise, state governments, which tax gas on average at 23 cents per gallon, stand to lose over $600 million in revenues from the driving decline.
Unlike the federal government, the loss in revenues from gas taxes at the state level will not be compensated by an increase in corporate income taxes from oil companies, which reported windfall profits this past year. In a time when states are strapped for cash and bridges must be repaired to avoid new disasters, this loss of revenue could further place an additional pinch on state budget shortages. And as consumers continue to purchase vehicles with better fuel efficiencies, the problem will become more and more pronounced. State governments would be wise to begin cutting expenses and/or finding new revenue sources to compensate for the impending gasoline revenue choke hold.
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