Battle4Liberty

In a recent post, I addressed a call from statists to increase the gas tax. I suggested that Republicans accept the proposal, but only if the plan included a revenue-neutral cut in income tax rates across the board. I reasoned that a use tax is always better than an income tax and that such an offer wouldn’t be accepted anyways because leftists just want to raise taxes. My post generated several more questions worth answering.

Washington can’t be trusted, so shouldn’t we oppose all tax increases regardless of the trade-offs? I don’t think so. I agree that Washington can’t be trusted, which is why I don’t think any tax trades (i.e., raise one and cut another) should include new taxes. This is why I opposed Herman Cain’s 9-9-9 plan. In theory, it would have been better than the current system, but would have also created a new tax on sales. I prefer a sales tax to an income tax, but over time, the 9-9-9 rates would change and we’d be stuck with an additional tax. We should only add a sales tax if we eliminate the income tax in the same bill.

Washington shouldn’t finance highway construction anyway, so why consider raising the gas tax even if income tax rates are lowered? In a perfect world, I’d rather turn all road construction over to states, local governments, and private entities. Arguably, there is a limited federal role for highway construction, but only for roads that are vital to the national transportation system. The Feds should not be in the business of sending funds back to the states for any other projects. The quagmire here is that the Feds already built the roads and someone has to maintain them. My point is simple: IF the federal government is going to engage in highway projects, than it should do so only with funds its collects from a usage tax, not the general coffers. The gas tax is far from perfect, but it’s better than the alternatives.

Obama’s proposed budget makes my point. The President is asking for increases in “grants” for local road projects from the general fund. Federal grants to local governments are unconstitutional, inefficient, and unnecessary. States and local governments can raise their own taxes to pay for such programs. My proposal is simple: ALL revenues derived from the gas tax must go to pay for vital national highway projects (not projects of state or local interest) through the Federal Highway Trust Fund (FHTF), and NO revenues from other sources should pay for any highway projects. If it is necessary to raise the gas tax to achieve this, then do so, but ONLY with an across-the-board, dollar-for-dollar cut in income tax rates.

Why should we trade income tax rates for gas tax rates when the income tax should be abolished or completely overhauled to a flat tax anyway? Sometimes we have to take incremental gains when we can get them. Followers of this blog know my strong preference for a sales tax (not a VAT, and not in addition to any income taxes) or a simplified flat (income) tax. The former is better, but the latter is easier to achieve, at least in the short term. My disgust for the current system aside, we still need to take action that moves us in the right direction. The left understands this point very well. Just consider how long they’ve worked on shifting healthcare from an individual responsibility toward a single payer system. Their progress has occurred one step at a time over decades.