Transportation Taxes Can Cut Carbon Emissions – ITEP

TL/DR –

The US could reduce carbon emissions and foster climate resilience by reforming its tax code to disincentivize emissions and encourage low-carbon design, with transportation taxation being a key starting point. Updating the federal gas tax, which has been eroding due to inflation since 1993, could raise revenue for maintaining and enhancing transportation infrastructure, while encouraging the use of more fuel-efficient vehicles. Additionally, states should adjust their gas tax rates regularly and consider vehicle-delivery fees and congestion pricing, in order to generate consistent funds for roads and transit and prompt greener choices.

Utilizing Tax Codes to Drive Down Carbon Emissions in America

The US tax system has the potential to be a powerful tool in creating a greener, more climate-resilient society. By adjusting federal, state, and local tax codes we can reduce carbon emissions, with transportation taxation as an effective starting point. As it stands, cars and trucks account for approximately a quarter of all US greenhouse gas emissions.

Gas taxes can stimulate the purchase of more efficient vehicles and reduce driving, while also generating revenue for sustainable transportation infrastructure. However, the federal gas tax has been depreciating since 1993, maintaining a fixed rate of 18.3 cents per gallon for 31 years. This underutilization of gas taxation is in stark contrast to the precedent set in the 1980s when President Ronald Reagan increased the rate significantly.

To counteract the decades-long erosion of the gas tax’s purchasing power, at least a tripling of the rate is needed. This could bolster funds for the upkeep of roads, bridges, and train tracks, especially given the increasing weather-related damage they face. A more robust gas tax would also promote the use of fuel-efficient transportation and help fund infrastructure costs.

Though essential for state-level transportation infrastructure, many states have allowed their gas taxes to wane. Nonetheless, 23 states and Washington, D.C., have wisely linked their gas taxes to inflation or other metrics. Another seven states have updated their gas taxes in the past five years.

As vehicles become more fuel-efficient, gas taxes alone can no longer be the main revenue source for transit and roads. One solution could be to adjust the flat sales tax on new vehicles applied in 45 states, charging more for gas guzzlers and less for efficient models. Vehicle-delivery fees, particularly for electric vehicles, could also generate additional revenue.

Congestion pricing, as seen in London, Stockholm, and Singapore, can also help decrease emissions and increase walkability. Programs like these have the added benefits of reducing traffic, promoting public transit usage, and improving public health through cleaner air and safer streets.

With carbon emissions causing increasingly devastating natural disasters like Hurricanes Helene and Milton, we should seize this moment to make tax policy reflect new climate realities. There are abundant tax policy options available for reducing carbon emissions, promoting energy efficiency, and raising revenue to invest in greener communities.

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