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Increase the amount of tax levied on fuels and eliminate the Texas vehicle registration tax
Eliminating Texas's dependence on foreign oil is one of the most important challenges not only our state, but as a nation as whole faces over the coming years.
Texas currently imposes a 20 cent per gallon tax on both gasoline and diesel fuel. If we were to increase the amount of tax levied on non renewable, petroleum based fuels from 20 cents per gallon to 30 cents per gallon, we would hasten the adoption of clean burning, renewable fuels like biodiesel.
To even up the equation for the consumer, we could eliminate the cost of vehicle registration that every vehicle owner in Texas currently has to pay so that there is no net increase in motoring costs. This would transfer the tax collection burden from vehicle tax registrations to the price of fuel.
Pay for this by eliminating the cost of vehicle registration that every vehicle owner currently has to pay.
In 2003 there were 18.7 million vehicles registered in Texas and the registration process raised $1.2 billion dollars per year in taxes for the state. This is the equivalent of $65 per vehicle. If we were to eliminate this vehicle registration tax, it would relieve Texas vehicle owners of $1.2 billion dollars in taxes, the equivalent of 10 cents on a gallon of fuel.
The increased tax rate for both gasoline and diesel fuel of 10 cents per gallon would generate an additional $1.3 billion dollars from the 10 billion gallons of gasoline and 3 billion gallons of diesel currently sold in the state of Texas each year, making this a tax revenue neutral idea.
To ensure that proper record keeping is done, we can use the state safety inspection sticker and license plate system to ensure that vehicles are not stolen and correctly titled.
$60 million increase in tax payer burden of keeping biodiesel tax free is offset by the tax collection savings generated.
We have estimated that it costs the state of Texas and tax payers about $3.20 per vehicle per year to collect the vehicle registration tax. If we were to eliminate this vehicle registration tax it would save the state and Texas tax payers $60 million dollars per year.
The $60 million dollars in savings would offset the loss of tax revenue caused by replacing 300 million gallons of taxable petroleum based diesel fuel with biodiesel that is tax free.
A 10 cent per gallon increase in the price of non renewable fuels in Texas would spur dramatic change in both the amount of attention we pay to our vehicle fuel efficiency performance and the adoption rates of alternative, renewable fuels like biodiesel.
Who might be hurt by these changes in the Tax system?
Commercial shippers and truckers might complain that this change in the tax burden falls unduly heavily on them. The reality of this tax system is that it would mean that all commercial companies would be paying the same amount of tax, so it is equal for all companies.
The only difference would be that these shippers would no longer be subsidized by the vehicle owning tax payer to move products on our roads. One side benefit to come out of more expensive gas would be that rail transportation would become more price competitive as a transportation method for shippers to use. This would in turn help reduce the amount of long distance heavy truck traffic on our roads, a boon to drivers as they can get home every night and not have to live on the road.
High mileage drivers would pay more tax
Some folks would say that this system taxes me more because I am a high mileage driver and therefore I am being penalized under this proposed change to the tax regime. The reality is that this is the way it should be. If a vehicle drives more miles, it uses the public roads more heavily, so should pay a bigger contribution towards the upkeep and maintenance of our road system.
Under this proposed 'pay for what you use" tax system, the high mileage user does still have choices as to how much tax they have to pay, which is not the case under the current tax regime. Under the current vehicle tax registration system, motor vehicle owners have no choice as to the amount of tax they pay as it is a flat tax across all vehicle users, irrespective of how much each vehicle uses the road. Under the proposed fuel based taxation system, users would gain the choice as to how much tax they pay. If you drive more, you use more fuel, therefore you pay more tax. This free market approach is a much more American way of doing things and likely to be more successful in changing consumer behavior than a mandated standard like CAFE or voluntary fuel efficiency initiatives like http://www.fueleconomy.gov.
Use a fuel efficient vehicles and cut your tax burden
The high mileage user still has choices under this taxation system as they can alter their driving habits and reduce their mileage, maybe by living closer to work. Alternatively if reducing mileage is not an option, they can opt to purchase a more fuel efficient vehicle so that they can still drive the same distances for the same cost per mile that they currently pay. Their more efficient vehicle would be using less fuel, so even though the price of each gallon of fuel is more expensive, the user would be incurring the same fuel costs per mile when compared to their previous, less fuel efficient vehicle.
This change in behavior is exactly the reaction we are looking for and if phased in over a number of years, would enable people to prepare for the coming change. If we let the markets do the work and let the consumers have the choices, the changes we need in our fossil fuel habit will happen very quickly and on a much large scale than any government mandated efforts can bring.
Increased taxation on petroleum based fuels would spur the adoption of renewable fuels like biodiesel
Since 2001 there is no tax levied on biodiesel in Texas, which means that a B20 biodiesel blend can be priced similarly to petroleum based diesel fuel.
A 10 cent per gallon increase in the price of diesel fuel would give tax free biodiesel nearly a 10 cent per gallon price advantage over diesel fuel. This price differential would enable a B20 biodiesel blend to become significantly lower cost than diesel fuel and its adoption rate state wide would be dramatic.
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