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Posts from the Gas Tax Category

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Is Usage-Based Auto Insurance The Gas Tax You’ve Been Waiting For?

"Drive less, save big" graphic from Metromile

“Drive less, save big” graphic from Metromile

Why do people eat so much at buffets? Once they’ve paid to enter, there’s no cost to eating as much as they can – aside from, well, feeling tired and sick.

Owning a car is like buying a 24-hour pass to a Vegas buffet. Every single day.

We drive so much because once we’ve shelled out to have a car, the cost to drive each extra mile is minuscule. While the average cost per mile is nearly 60¢, according to the IRS and AAA, the cost to drive just one more mile, a.k.a. the marginal cost, is just the cost of fuel. That’s 11-13¢ a mile at current rates, assuming a 25-30 mpg car, and the $3.32 per gallon gasoline (the CA average as of February 28,2015, per AAA). The fuel cost is about 20% of the total cost of owning a car, on a per-mile basis. For a single extra trip under 13 miles, true for most trips and most commutes, driving is potentially cheaper than taking the bus.

The more people feel the cost each time they drive, the less they will drive like they eat at a buffet. You might be willing to pay $1 for that first brownie, but not for the eighth one… unless that eighth one is “free.” Suddenly, some car trips that made sense when they cost 10¢ a mile, don’t make sense when they cost 15¢ or 30¢ a mile.

Artificially cheap or free parking has an integral role here – parking guru Donald Shoup estimated that employer parking subsidies amounted to 27¢ a mile on average for commuters in 1997. If employer parking subsidies went up at the same rate as inflation, that’s 39¢ per mile in 2015 dollars – that’s triple fuel costs for a 25 mpg car – and twenty times the current U.S. average gas tax of 48¢ per gallon, ~2¢ per mile. The more the share of the cost of driving can be felt each time people drive, the less driving people will do.

Gas taxes are effective, but incredibly unpopular. But now, there is another tool that would have a similar impact, without increasing the cost of driving per se – usage-based insurance.

The more you drive, all else equal, the more likely you are to get into an accident, and thus the costlier you are to insure. Traditional insurance gives discounts for driving fewer miles, but those discounts are modest, probably because the mileage figures that people report are unreliable. The new usage-based insurance policies charge you based on how many miles you drive, using a device that plugs into your vehicle’s diagnostics port to count the miles driven. A usage-based policy effectively converts part of the fixed cost of having a car to a variable one. In other words, it functions like a gas tax.

And a usage-based policy lets an insurer pick off those low-mileage customers that are the cheapest to insure, by giving them a lower price than a non-usage-based policy. With enough time and popularity, that could mean auto insurance gets pricier for people who drive a lot, as they’re the only people left on buffet-style policies, and are thus more prone to getting into accidents and are pricier to insure. This process is known as adverse selection. In fact, “The number of consumers who actually purchased a UBI [usage-based insurance] policy has nearly doubled in the last year and a half,” according to market research firm Towers Watson. Under the current paradigm, people who drive less subsidize the insurance of people who drive more, just as the abstemious subsidize the voracious at buffets.

Metromile – A Personal Experience

I signed up for one such policy recently – Metromile, currently the first and only usage-based policy in California. Read more…

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New Report Tells CA How to Get More Bang for its Transportation Bucks

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This report from the University of California’s Climate Change and Business Research Initiative tells California how to put its money where its mouth is.

A new report [PDF] offers suggestions for ways that California could better spend the roughly $28 billion it invests in transportation every year, both to be more cost-effective and to better align with the state’s environmental goals.

Authored by researchers at the Climate Change and Business Research Initiative, a partnership between the law schools at UCLA and UC Berkeley, the report stemmed from a day-long workshop last fall with a group of California policy makers, transportation experts, and advocates that included some of the top minds in the industry.

“We could put money towards making roads safe for people who ride bikes, people who want to walk, and people who take transit,” said Ethan Elkind, lead author of the report. “At the same time, that would help manage traffic congestion.”

Other ideas include:

  • Develop state project performance standards to make sure that new transportation projects align with state environmental and energy goals. There are some good models already in existence, including the project performance analysis for Plan Bay Area, which scores projects on things like integrating land use and transportation as well as cost-benefit ratios.
  • Lower the current 2/3 voter threshold for local transportation funding measures, and tying the measures to metrics related to environmental goals.
  • Fix existing infrastructure before building new roads–and make sure that repairs and maintenance include safety for all road users, not just people driving cars.
  • Require local governments to reduce parking requirements in transit-intensive areas to give developers room to meet actual parking demand more cost-effectively while reducing the cost of transit-oriented projects.
  • Develop mileage-based user fees for transportation funding in place of the shrinking gas tax, which decreasingly reflects actual road usage as vehicles become more fuel efficient.
  • Amend Article XIX of the California Constitution, which restricts the use of state gas tax funds for transit operations.

Read more…

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CA Legislature’s New Session: Hit-and-Run, Cap-and-Trade, No Tolls for Bikes

Screen Shot 2014-05-02 at 4.34.24 PMA new California legislative session started last week with the swearing-in of ten new Senators and 27 new Assemblymembers, the introduction of a hundred new bills between the two houses, and adjournment until January 5.

These first-out-of-the-gate bills can be discussed in hearings as soon as the legislature reconvenes, since by then they will have been “in print” for 30 days. Bills introduced in January will have to wait a bit longer.

Some of the new bills are placeholders that are likely to be further developed as the session moves forward, but some are identical to bills from last year’s session.

Hit-and-Run

A case in point is A.B. 8, from Assemblymember Mike Gatto (D-Los Angeles), which would create a statewide Yellow Alert system to inform law enforcement and the public about vehicles involved in hit-and-run crimes. It is exactly the same bill as last year’s A.B. 47.

A.B. 47 sailed through both houses, then was vetoed by Governor Brown.

Earlier in the session, the Governor had already signed a law similar to Gatto’s bill that allowed the existing Amber Alert system to expand from childhood abductions to include lost or missing seniors and disabled people. The governor said in his veto message that he didn’t want to overload the statewide alert system before the newly added pieces were tested.

Gatto considered this an invitation to try again, and so he has. His staff says they are confident the bill will pass easily again–and that by the time it does the governor will have seen that the system is not overloaded.

Other early bills in the 2015-16 session are listed after the jump. Read more…

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Exposed: Oil Industry’s Astroturf Tactics Against CA Cap-and-Trade

The Western States Petroleum Association extols its campaigns against cap-and-trade purporting to represent “consumer concerns.” Source: WSPA

It’s no surprise that the oil industry is fighting California’s cap-and-trade program. But it is enlightening to see the strategy laid out in a leaked PowerPoint presentation [PDF].

Last week, Brad Wieners at Bloomberg Businessweek leaked a presentation put together by the Western States Petroleum Association (WSPA), an oil industry lobby firm that operates in California. In the presentation slides, WSPA details its strategy to oppose regulatory efforts in California, Oregon, and Washington to combat climate change, including California’s Global Warming Solutions Act (A.B. 32), low carbon fuel standards, and the cap-and-trade system.

Examples of oil industry astroturf campaigns in the states of Washington, Oregon, and California. Images via WSPA powerpoint [PDF]

Examples of oil industry astroturf campaigns in the states of Washington, Oregon, and California. Images via WSPA powerpoint [PDF]

The main strategy is what Wieners calls an “astroturf campaign”:

Groups with names such as Oregon Climate Change Campaign, Washington Consumers for Sound Fuel Policy, and AB 32 Implementation Group are made to look and sound like grassroots citizen-activists while promoting oil industry priorities and actually working against the implementation of AB 32.

One of those groups put together the “Stop the Hidden Gas Tax!” campaign, which tried to convince California consumers to protest against rising gas prices that will supposedly result from the fuel industry coming under cap-and-trade regulation in January. The campaign didn’t get much traction, perhaps because gas prices are falling, or perhaps because, as Tim O’Connor of the Environmental Defense Fund points out, California voters have support clean energy alternatives.

O’Connor told Business Week:

It’s eye-opening to see the lengths [the WSPA] has gone to push back rather than move forward. I don’t think anybody knew how cross-jurisdictional, cross-border, and extensive their investment is in creating a false consumer backlash against [climate legislation].

WSPA spokesperson Tupper Hull responded in the article:

We did not oppose AB 32 when it passed. We believe it’s good to have the reduction of greenhouse gases as a goal. We support that goal. [But] hundreds of pages of regulations have been added to what had been a page-and-a-half document, and we do object to many of the additions.”

However, WSPA took part in the formulation of those regulations.

A.B. 32, and its cap-and-trade regulations that charges industries money for the pollution they emit, is groundbreaking and frightening to big oil, as evidenced by WSPA’s presentation. It is just beginning to produce major funding streams for all kinds of sustainable programs, from affordable housing to transit to high speed rail, and the rest of the nation, and the world, are watching to see how well it succeeds. A.B. 32 could spawn climate change legislation elsewhere, equally noxious to the oil companies’ polluting habits, so no wonder they are attacking it every way they can.

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The Hidden Gas Tax That Doesn’t Exist

GasTaxMobileBillboardYou may have seen the ads on Facebook, or on one of the roving billboards being pulled by a gasoline-powered truck. They warned darkly of a coming “hidden tax” on fuel that was so hidden nobody in the media was talking about it. You may have wondered what it meant, even as the ads urged you to sign a petition today.

Last week, the oil-industry-backed effort to get people riled up about the “coming hidden gas tax” delivered its petition [PDF] to the California Air Resources Board’s monthly meeting in Diamond Bar.

The California Drivers Alliance gathered a whopping 115,000 signatures, and “dozens” of people showed up to deliver them. It urges the Air Resources Board to delay its “plan to increase fuel prices next year” and charges that the agency has been “unresponsive” and “has not even put this far-reaching policy on its agenda for public discussion.”

Not a word of which is true.

There is no “hidden gas tax” that will suddenly come into being in January. The Air Resources Board has no “plan to increase fuel prices,” nor could it do so. The only change coming is that transportation fuels will become subject to California’s cap-and-trade system.

That means that distributors and transporters of fuels must either 1) comply with requirements to produce no more than a certain amount of greenhouse gas emissions (the “cap” on emissions), or 2) buy enough “pollution credits” from the state to “meet” the cap. This is the “trade” part of the system.

The EPA estimates that transportation contributes a quarter of the greenhouse gas emissions in the country.

To adopt the industry’s tactic of endless repetition: “There is no ‘hidden tax,’ or any other tax associated with [California climate change law A.B. 32] programs,” according to a written statement from Dave Clegern of the Air Resources Board. “There is simply a market mechanism, which industry preferred, to allow businesses to spread their emission reductions between now and 2020 . . . instead of having to make those greenhouse gas reductions all at once.”

The Air Resources Board knows that the industry prefers this method because it has said so. “The oil industry and dealers were at the table through this whole process, and have been aware this coverage was coming for at least five years,” wrote Clegern.

In official comments submitted to the Board in 2011, the industry’s trade group, the Western States Petroleum Association, wrote: “WSPA reiterates its support for the Cap and Trade program and a market-based approach to implementing AB 32.” [PDF]

Read more…

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Thoughts at a Workshop On Replacing CA’s Gas Tax With a Mileage Fee

In 2017, California plans to pilot a new mileage-based Road User Charge designed to potentially replace the current state gas tax. Photo Wikimedia

Earlier this week, I attended a California Sustainable Transportation Funding Workshop, hosted by Caltrans, Southern California Association of Governments (SCAG), the California Transportation Commission (CTC), and the Mileage-Based User Fee Alliance (MBUFA). The half-day program focused on how the state of California could shift from our current gas tax funding stream to one based on a per-mile fee.

Let me first say that I usually mostly hang out with a bunch of left-of-center city people like me; we get around mostly by bicycling and walking. My friends and colleagues tend to support the idea of a per-mile fee, because we expect that it could help motivate people to drive less, and use other modes more.

This workshop wasn’t populated by a bunch of people like me. I don’t think anyone else arrived there by bicycle. As far as I could tell, it was primarily people who are more mainstream: people who drive and who, for the foreseeable future, expect our car-centric transportation system to look more or less like it does now. Among the program’s sponsors was the libertarian Reason Foundation.

What was interesting about the workshop was where the left and the right agreed: gas tax revenues aren’t enough to cover transportation infrastructure costs, and per-mile fees could work better. Similar right-left agreements occur with some Shoup-inspired parking reforms and Express Lane toll programs.

California's Gas Tax

In 1994, California’s Gas Tax was set at 18 cents per gallon. It remains unchanged today, but, due to inflation, that 18 cents is now worth about 11 cents. Graph via Caltrans

Speakers at the conference set the stage by describing the situation, which they described as “The Federal & California Financial Cliff.” The federal gas tax is 18.4 cents per gallon. The California gas tax is an additional 18 cents per gallon. These amounts were set in the early 1990s. Unlike percentage-based sales taxes, which fluctuate with price changes, the gas tax remains at a flat rate. Since the ’90s, inflation has effectively reduced California’s gas tax to its lowest inflation-adjusted level since California gas taxes began in 1923.

Gas taxes are dedicated to be spent on transportation only. As the gas taxes lose value over time, governmental transportation budgets are increasingly subsidized by other taxes paid by everyone, including sales taxes, property taxes, etc. Recent estimates show that only about half of overall transportation funding is paid for by dedicated gas tax revenues. To some extent, this is fair: even non-drivers derive some benefits from highways, because everyone buys goods shipped by truck. The unfair aspect of this system is that non-drivers’ taxes go, in part, to freeways that non-drivers do not use.

Transportation leaders are generally aware that general funds subsidize transportation expenditures, but many drivers assume that driving-based taxes are what pays for roads. Many drivers, though already subsidized by non-drivers, still think they’re paying too much.

There are at least three more factors that influence the gas-tax-income vs. transportation-expenditures mismatch.  Read more…

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California Legislation Watch: Weekly Update

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The California Legislature saw a lot of action in the last two weeks on bills related to sustainable transportation. The deadline to pass bills out of committee was on the Friday before Memorial Day weekend, and today is the deadline for all bills to be voted on by their houses of origin. If they couldn’t pass by today from the Senate to the Assembly, or vice versa, then they died for this session.

Below are the fates of some of the bills Streetsblog has been following. There are a few other relevant bills that don’t appear here because they have already passed from their house of origin, including S.B. 1151, which would raise fines for traffic violations in school zones, and A.B. 1193, which would require Caltrans to institute standards for protected bike lanes.

A driver’s license is still more important than the safety of bicycle riders and pedestrians: A.B. 2398, Marc Levine’s (D-San Rafael) Vulnerable User Law, passed out of the Assembly Appropriations Committee last week, but not before it was amended to delete the automatic driver’s license suspension it originally called for. As it’s written now, the bill would raise fines and add a point against a driver’s record if the driver is convicted of causing bodily injury to a vulnerable road user, including bicyclists and pedestrians. The bill passed the Assembly 72-2.

At least they’ll have to stop: A.B. 1532 from Mike Gatto (D-Los Angeles) also passed the Assembly, on a 74-4 vote. This bill would suspend the license of a driver convicted of leaving the scene of a crash where any person is struck, whether that person is injured or not. “Victims and families deserve to know that cowards who drive recklessly, and purposefully avoid responsibility, can no longer drive the streets,” said Gatto in a press release. “AB 1532 is a sensible fix to the law that will lead people to think twice before leaving the scene of an accident.”

Read more…

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Sen. Steinberg Proposes Carbon Tax on Gas Instead of Cap-and-Trade

Estimated effect of a carbon tax on sources of United States electrical generation Source: US Energy Information Administration via wikimedia.

Estimated effect of a carbon tax on sources of United States electrical generation Source: US Energy Information Administration via wikimedia.

CA Senator Darrell Steinberg proposed a change yesterday to California’s nascent cap-and-trade program that would replace next year’s cap on fuel emissions with a per-gallon carbon tax. Steinberg called it a “broader, more stable, and more flexible” way to reduce emissions from fuels than cap-and-trade.

His proposal would apply the revenue raised from the tax towards tax relief for poor and middle-income Californians, who would feel the greatest pinch from higher gas prices. That could help defuse anger at having to pay more at the pump, while still discouraging demand for gas. “Under either [program], consumers will pay more at the pump. That’s necessary,” said Steinberg. “If carbon pricing doesn’t sting, we won’t change our habits.”

CA Senate President Pro Temp Darrell Steinberg, D-Sacramento. Photo: Sacramento Bee

CA Senate President Pro Temp Darrell Steinberg, D-Sacramento. Photo: Sacramento Bee

Reactions to Steinberg’s proposal so far have been mixed. The Western States Petroleum Association prefers it as “a transparent alternative” to cap-and-trade, and the Environmental Defense Fund criticized what it sees as a mid-stream switch that could “compromise” CA’s emission reduction strategies.

Stuart Cohen, executive director of TransForm, said “we strongly believe that California is creating an excellent cap-and-trade program that is, and will work, effectively. Yet a carbon tax is an extremely clear and straightforward, and ultimately more predictable, way to approach the fuels sector.”

“If this had been offered as a serious proposal seven years ago, we would have thought it was heaven-sent,” he added. “I don’t think it makes sense to reject it outright. It’s certainly worth having the discussion” about cap-and-trade vs. a carbon tax.

John White of the Clean Power Campaign, a coalition of public interest groups working for clean fuels, says his organization has no official stance yet on the proposal. However, he said, “This is a good conversation to have. A carbon tax is a different way to do the same thing. The point of collection is also at the pump, but with cap-and-trade there’s no clear signal except for a higher price, and no predictability of what that price would be.”

Read more…

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Lawmakers Score Conservative Bona Fides By Attacking Efficient Transport

Senator Mike Lee (R-Utah) and Congressman Tom Graves (R-Georgia) have introduced a bill to eliminate federal involvement in transportation policy, which would spell disaster for funding that supports transit, biking, and walking. A largely symbolic vote in favor of “devolution” will allow Republican members of Congress to demonstrate their conservative bona fides.

Senator Mike Lee is one of 21 Republicans sponsoring a bill to eliminate the federal role in transportation. Image: ##http://blog.heritage.org/2013/11/15/changing-transportation-status-quo-empowering-states/## The Foundry##

Senator Mike Lee is one of 21 Republicans sponsoring a bill that would decimate funds for transit, biking, and walking. Image: The Foundry

The Transportation Empowerment Act (TEA) — get it? — is sponsored by 21 lawmakers, all Republicans. The Hill reports that the arch-conservative Heritage Action group will be scoring lawmakers on how they vote. The bill would reduce the federal gas tax from 18.4 cents per gallon to 3.7 cents over five years and turn all spending decisions over to state governments.

Heritage Foundation writer Emily Goff, in her report on TEA, specifically notes that the bill would decimate dedicated funds for transit, biking, and walking projects. Heritage sees that as a big plus:

Under the current highway bill, Moving Ahead for Progress in the 21st Century, at least 25 percent of authorized funding for FY 2013 was diverted to non-general purpose roads and bridges. Transit, the largest diversion, received $8.5 billion, or 17 percent, of authorized funds. Other diversions include $809 million authorized for the transportation alternatives program (TAP), which pays for bicycle and nature paths, sidewalks, and community preservation activities, none of which reduce congestion or improve mobility for the motorists paying for them.

Heritage remains oddly silent on the massive subsidies that pay for roads. Nor do they seem to notice the enormous, wasteful boondoggles perpetuated routinely by states.

And Heritage doesn’t seem convinced that making transportation systems more efficient in the nation’s economic hubs, lowering the death toll from nearly 34,000 traffic fatalities per year, and reducing dependence on fossil fuels are in the national interest. Your state might not lie along a major freight corridor, but freight bottlenecks and delays cost all of us.

Conservative lawmakers have been trying unsuccessfully to enact devolution since the mid-1990s. House Transportation Committee Chair Bill Shuster (R-Pennsylvania) has made it his mission to persuade even the most conservative of Republicans that the founding fathers and free-market thinkers including Adam Smith intended a strong federal role in transportation — and he intends to keep it that way.

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Why You Should Be Angry About CA’s “Highest Gas Tax in the Country”

I know it’s tempting to gloat.

Today, newspaper headlines are blaring the news that with the newest increase in the state’s gas tax, that California now has the highest gas tax in the country.

As I said, I know it’s tempting.

But, it’s the result of bad policy. None of the money from that increased gas tax will go to fix California’s crumbling infrastructure, or restore and fund any local transit system, or paint an inch of new bike lanes. It’s all going to the general fund, thanks to Arnold Schwarzengger and a short-sighted legislature.

To balance the state budget in 2010, Governor Arnold Schwarzenegger proposed, pushed for, and eventually signed a law that changed the tax structure for gas taxes with a so-called “fuel swap.” The new tax structure eliminated the sales tax on fuel and raised the excise tax. The purpose of the change was to eliminate funds that were dedicated towards transportation from the gas tax so that the Governor could balance the state budget with fewer cuts elsewhere and no tax increases.

After years of Governors Schwarzenegger and Gray Davis “declaring a fiscal emergency” to basically rob transit operations funds that were dedicated by voters in 2002 and 2006, the State Supreme Court ruled that there had to be an actual emergency, not just a lack of political will, to declare and emergency. It was at this point, that Schwarzengger devised the “fuel swap” plan.

The program also allowed the state to raise gas taxes so that the amount collected remains static even as the amount of fuel consumed decreases. If this meant a consistent level of funding for transit and road repair projects, the program might be more popular and useful.

But it doesn’t. As George Runner, a member of the state Board of Equalization that approved today’s increase noted when he voted against it, “The goal of the fuel tax swap wasn’t good  tax policy. Instead, its sole purpose was to allow the Legislature to move more than a billion dollars in gas tax revenues into the state’s general fund.”

The plan was met with scorn by newspaperstransit advocates and environmentalists when it was proposed. Today’s news is just the by-product of that bad decision.  Read more…