Americans are taking a crash course in energy economics, geopolitics and climate change this spring.
For starters, there’s no such thing as a green war. Not only does modern war consume titanic quantities of resources, but its subsequent clean-up is sure to consume even more. As nations are being forced to return to their respective corners, the cost of nearly everything will continue to climb. The unexpected threat of nuclear war would temporarily reverse climate warming. Several years of nuclear winter would produce widespread famine. The imminent disruption of agriculture across Ukraine will destabilize food delivery systems in any case.
If you are wondering whether things will get worse in 2022, you should count on it. American politicians want to appear empathetic and responsive but don’t really know what to do. Good politics and smart policy are no longer functioning in tandem. Three state governments have already decided to suspend their gasoline taxes. There is even discussion in Washington of suspending federal fuel taxes. It is presumed price savings at the pump will prove politically beneficial for incumbents. This appears a dubious proposition.
In Colorado, the state gas tax is currently 22-cents-per-gallon (44 states collect more, many far more), only 5% of current fuel prices. Include the 18-cent federal levy and savings could rise to 10%. How would consumers know they were truly receiving this break when pump rates often jump by double digits from one day to the next? And will retailers actually pass these reductions along, or merely pocket them?
Gov. Jared Polis is reportedly exploring with key legislators a moratorium on state petroleum taxes between now and election day. What’s a bad idea for states with far higher fuel taxes would be particularly problematic for Colorado. Just as the Legislature has finally appropriated additional funds for a backlog of transportation projects, a rollback of gas taxes would jerk the rug out from under traffic planners at both the local and state level. State road conditions would continue to deteriorate, and congestion would grow even worse. For once, both environmentalists and road contractors likely find themselves on the same side of this question.
The truth is that rebates or rollbacks are only being proposed because most states remain awash in unspent federal COVID relief funds. Money, as we know, is fungible, yet there has long been a sense that excise taxes levied on specific products or transactions should bear some connection, however tenuous, to the purposes for which they are appropriated. Road taxes have historically gone to road costs, for example. If fuel taxes are suspended, it is unlikely they will be back-filled from the state’s general fund. Colorado drivers will fail to link the potholes and snarled traffic encountered on their commutes to the 20-cent-per-gallon savings they may be receiving. Rather, they will wonder why their elected representatives are failing to “Fix our damned roads!” Bad policy makes bad politics. Polls repeatedly show Colorado taxpayers loathe gas taxes, which explains why they haven’t been raised for thirty years.
TABOR distorts Colorado’s fiscal policy in unexpected ways. The additional tobacco taxes approved by voters a few years ago were expected to be funneled into health-care programs providing care for victims of tobacco addiction. This was not required, however, and when the Governor and Legislature began casting around for additional dollars to fund universal pre-K classes, they raided these newly-available tobacco revenues. There was nothing intrinsically illegal or even unethical in this diversion. It was simply politics. Recent public concern about flavored vaping products marketed directly to teenagers reveals how poor policy can paint legislators into a corner. While half our Legislature wants to prevent, even proscribe, the sale of flavored vaping products to teens, supporters of universal pre-K are urging Polis to veto any prohibition since tobacco revenues are needed to keep the pre-K program afloat.
In other words, we may soon choose to ignore an addiction spreading rapidly among Colorado teens in order to fund the pre-K instruction we hope will give their younger brothers and sisters a head start in acquiring academic competency. With extra moneys available to the Legislature this year, it seems like we could surrender some of our tobacco revenues in order to protect teens. Then, next year we could cook up another revenue source for pre-K students.
California Gov. Gavin Newsom is proposing a flat rebate of several hundred dollars paid to every taxpayer. Politically this might prove smarter than a tax cut since drivers will receive a check, while a tax rollback could be virtually invisible. Of course, not everyone actually drives, while those who do won’t drive the same distances, so universal cash rebates present equity issues sure to be challenged in court. Nonetheless, bad policy just might be smarter politics.
Miller Hudson is a public affairs consultant and a former Colorado legislator.