But this is precisely what makes fuel fees so compelling and necessary.

This is because fuel fees in part represent a type of ‘sin tax’.

http://en.wikipedia.org/wiki/Sin_tax

A sin tax is a kind of sumptuary tax: a tax specifically levied on certain generally socially proscribed goods and services, for example alcohol and tobacco, candies, soft drinks, fast foods, coffee, and gambling.

Taxing automobile usage has always been considered a sin tax because of the negative externalities associated with air pollution. (In this sense, it is a fee used by the state to compensate outside or ‘third parties’ – neither buyer or seller of a pollutant – who are affected by the transactions of others.)

Sumptuary taxes are ostensibly used for reducing transactions involving something that society considers undesirable, and is thus a kind of sumptuary law. Sin tax is used for taxes on activities that are considered socially undesirable. Common targets of sumptuary taxes are alcohol and tobacco, gambling, and vehicles emitting excessive pollutants. Sumptuary tax on sugar and soft drinks has also been suggested.

There are criticisms that a sin tax is a regressive and hurts the poor the most.

Critics of sin tax argue that it is a regressive tax in nature and discriminates against the lower classes, since taxation of a product such as alcohol or cigarettes does not account for ability to pay, therefore poor people pay a greater amount of their income as tax.

However, if the item being taxed is, like tobacco, widely understood to be both self-destructive and addictive, then it is good that the tax or fee is regressive. The tax is saving the lives of the poor, and is not primarily a form of compensation to outside parties.

Adam Smith supported the medical and moral arguments in The Wealth of Nations: “It has for some time been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and corrupt the morals of the common people.”

One could argue that cars and suburbs and the culture of commuting have always been a kind of drug, a kind of idealized escape from the realities of urban life.

And suburbs are hugely destructive, culturally and spiritually, but also materially. In the words of the popular critic of suburban sprawl, the development of suburbs in the United States is the single greatest misallocation of resources in the history of the world. But it’s not just the environment that pays the price, or the finances of the nation. In terms of personal finance, suburbs are complicit in shopaholic behavior, with ordinary people buying big houses in order to pack away all the stuff they buy but never use.

But suburbs, like small towns, have always been a magnet for cultural conservatives. They perceive suburbs to be wholesome and pure. Their image of the good life is a house surrounded by a white picket fence. (Even Prius-driving liberals in so-called ‘red states’ have bumper stickers that ask “What would Jesus drive?” – assuming that Jesus would live outside the city and drive a car.) In contrast, people typically associate ‘sin’ with dirt and pollution … and with city life.

This perception is both true as well as an illusion. For example, Manhattan is, per square meter, the most polluted place in the United States in terms of air quality. However, per capita, Manhattan is the most energy efficient place in the United States, with people getting around on foot or taxis or by mass transit, and by living and working in apartments and offices that are insulated by other apartments and offices.

There is understandably a tendency to segregate homes from workspaces based on cleanliness, both in terms of physical and moral pollution. The first zoning laws were passed in San Francisco, because there were tanneries in the cities surrounded by homes. The second city to establish zoning laws was New Orleans, because there were brothels surrounded by homes in the city. But these two places were urban areas, not suburban. One can have zoning laws in the city without fostering the desire to have far flung suburbs that provide an escape from urban ills. So the appeal of the suburbs is not entirely rational.

All of this begs the question of how culturally conservative Hawaii is, and wedded to cars and suburbs and the commuter mode of existence. An interesting example is found in the debates over developing Kakaako. The most outspoken critic of development there argued against the construction of residential buildings in Kakaako on the grounds that it would contribute to more traffic. But the whole purpose of building high-density mixed-use areas is to preclude the need for commuting. This is understood by pretty much everybody (e.g., on Oahu, it has been explicitly stated in the City’s General Plan in regards to Kapolei for a long time now). But astonishingly, this critic just did not get it. Even among critics of development in Hawaii, residential life is automatically associated with commuting. That is very culturally conservative.

Similarly, in regard to the condition of Oahu’s streets, let me relate a story that was conveyed to me somewhat recently. There was a wealthy family that left Hawaii in the early 1990s, just prior to the recessions that began to hit Hawaii every five years, who returned to vacation here. Now, back when they lived here, they were always complaining how liberal and leftist Hawaii is, about how Hawaii was a kind of Soviet Socialist Republic, with UH tuition set at $1,000 a year for a full-time student (even though their kids went there). On their recent vacation, they drove around Oahu, and noticed how all the streets in wealthy neighborhoods were nice and smooth, and how the streets in poorer areas were cratered with potholes. They were shocked and outraged at this. Hawaii is not socialist after all, they concluded. Hawaii is elitist. Like the billionaire investor Warren Buffet says about the stock market, when the tide goes out, you can see who is not wearing a bathing suit. When the easy money was coming in to the State, it was going out nice and fast to things that seemed progressive. But the political system showed its true colors when the money became scarce.

It’s just a short, six-minute segment but definitely worth a listen. Bottom line: As average mileage goes up, the gas tax–which still provides the backbone of all transportation funding–brings in less and less money even while total miles driven might go up. It’s not an effective funding solution.

1) It’s not a tax, it’s a fee, if it is dedicated to compensation for the particular service provided.

2) Neither the article nor the podcast assert that it’s “not an effective funding solution.” They assert that it is an UNPOPULAR measure. People love government services (roads) but hate to pay for them. The problem is a lack of political will on the part of politicians. Everybody wants to be Santa Claus. (Related to this, the podcast notes that the fuel fees are not a percentage, the way a sales tax is, but rather a fixed sum that loses value each year in the face of inflation. Politicians want to keep the fees low in the face of potential oil price hikes.)

The US has the lowest fuel fees in the developed world, by far.

http://en.wikipedia.org/wiki/File:Fuel_tax_in_OECD_countries,_2010..png

Remember, unless the government is expanding the road system dramatically, the overall cost of roads should be somewhat static and fixed. So again, the problem is very limited in scope. If everyone went out and bought a Prius and fuel fees were raised to pay for 100% of the cost of infrastructure, the cost to the individual driver would be no more than if everyone had gone out and bought an SUV (although with an SUV there is more wear and tear on the roads, entailing more overall cost).

And this is the real problem: equity between drivers of different types of vehicles. The real problem is that drivers of bigger and older vehicles would pay more.

And those drivers tend to be working class. Moreover, they tend to live out in the fringe suburbs and have the longest commutes. So this would really hurt a lot of folks who are already hurting.

But, to a certain extent, this might be a good thing. Raising fuel fees dramatically to pay for infrastructure would be a reality check on what has become in this day and age a lifestyle choice of living in the suburbs and driving a gargantuan vehicle.

In 2008, there was an article in the NYTimes about fuel prices and suburban expansion. When gas is cheap, suburbs grow; when its price rises, suburbs halt their expansion or even shrink.

And people who live in the farthest suburbs (‘fringe suburbs’) tend to be people who grew up in small towns. They will live in a small town or a suburb, but they won’t move to town. The same s true of an urbanite like Woody Allen, who will move from Manhattan to Paris or London or Rome, but not to a small town (although he might live in a suburban area just outside of town).

But in the NYTimes article, it noted that cultural values do change in an oil crisis. One woman who had a fifty mile or so commute had a neighbor who owned a pink Cadillac when she first moved into the new suburb. Every morning she would see the Cadillac and think “Wow, now I’d like to travel in style like that!” In 2008, she would see the Cadillac and think “Honey, you need therapy.” Under pressure, these kind of people will move to a suburb closer to town (and into a smaller house) for jobs and to save on fuel costs, but not usually into town itself. They are small-town cultural conservatives wedded to their cars and houses. (Conversely, Woody Allen probably does not know how to drive a car.)

Now, there might be a chance that increased fuel fees will eventually become more palatable to American politicians. If more educated people live in town or closer to town and drive cars like the Prius, they will be more amenable to maintaining fuel fees to sustainable levels — because it will hurt them less. And these are the people who vote.

So raising fuel fees might be a virtuous circle, compelling less driving, more urbanization, greater purchase of fuel efficient cars, which leads to greater willingness to raise the fees further, etc., etc.

(Also, people tend to imitate their social superiors. In the English-speaking world since the Industrial Revolution, this has meant moving into nice safe suburbs. In the US, it meant buying giant houses and cars. But now young, educated people don’t want giant anything, and they don’t want to commute, whether it be by plane, train or automobile. They want to work at Google and hang out with Woody Allen in the city. So over time this sentiment will spread to the rest of us.)