After I argued against McCain's summer gas-tax freeze, I received an email, the basic thrust of which was, "but everybody knows a gasoline tax is regressive, so how can progressives endorse it?" Well, as we will see, everybody doesn't know a gasoline tax is regressive. In fact:
- The poor are more likely not to buy any gasoline (i.e., to not own a car at all),
- poor families own fewer cars (and much fewer of the fuel-inefficient SUVs and minivans), and
- the poor tend to walk and use mass transit more.
Maybe the best description [PDF] of the situation is from a Dec. 2003 study for the state of California:
A gas tax would be regressive only across upper-income groups, in this case only in the top half of the income distribution.
Here is the data they present for the "Average Share of Income Spent on Gasoline in California, by Decile." In the table, "Decile 1 is the poorest income group, and decile 10 is the richest."
And this is not a new conclusion in the economic literature. As James Poterba, an economist for MIT and the National Bureau of Economic Research found back in 1991:
[L]ow-expenditure households devote a smaller share of their budget to gasoline than do their counterparts in the middle of the expenditure distribution.
Why is this the case? A 1997 study, "Daily Travel by Persons with Low Incomes," that used data from the U.S. Department of Transportation's 1995 Nationwide Personal Transportation Survey, says this:
- A quarter (26 percent) of low income households do not have a car compared to only 4 percent of other households. [I'd be interested in seeing more recent statistics.]
- People from low-income households are more likely to walk to work and are more likely to use public transit ... to get to work.
- People in low-income households are nearly twice as likely to walk for other than work activities as well ... For low-income single parent households, about 66 percent of trips are three miles or less.
A 2002 New Jersey Policy Perspective Report pointed out that that people were increasingly buying SUVs, pickup trucks and minivan, and "Most, if not all ... are purchased by mid- to high-income households." The EPA has found that such vehicles "burn 66 percent more fuel annually than passenger cars." (You could also throw sports cars into the list of expensive, fuel-inefficient vehicles typically bought by wealthier households.) The 2002 report cited but one example:
AutoPacific, a forecasting firm based in California, estimated that the median household income of the typical purchaser of a Lexus LX 470 is $250,000. The fuel usage of the LX 470, one of the heavier luxury sport utility vehicles, is less than 13 miles per gallon.
So the gasoline tax is regressive only across the top half of the income distribution. I stand by my critique:
OK -- let's provide more tax relief to the American people, as progressives have been pushing hard to do. So why not cut income or payroll taxes or give the public a larger direct rebate -- one that is linked to income so that the rich don't get yet more money that should be going to middle class and poor. Cutting the gas tax will send a lot of money to the rich, and not bloody much money to the people who can't afford a car, especially the urban poor. Who is out of touch?
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
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Delay And Deny Posted 3:01 pm
16 Apr 2008
McCain should cut taxes on the poor.
I, however, do not use deciles to define poor...I use orders of magnitude.
To me, anyone making less than $100,000 is poor. I say this because even with deflated house prices, the monthly mortgage is still out of reach, or a significant drain on income.
I define middle class as making $100,000 to $1 Million.
I define rich as making more than $1 Million.
You're deciles don't show the actually income associated with those groups, however, I notice that the highest taxed groups are decile 3 and 4 -- who probably would fall well within my definition of Poor.
What I see is that the taxes fall heaviest on the poor working man. The guy who does or has to take a car to work. Or the roofer or contractor who has to drive a truck.
In addition to reducing the gas tax, I have proposed that McCain cut income tax on the Poor (defined here as <$100K) to a maximum rate of 10%.
At this point in time, one of the biggest problems in our country has been the unbridled growth of government. Anything we can do to reduce taxes and reduce government overburdens will help us.
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Tasermons Partner Posted 3:47 pm
16 Apr 2008
By your definition, the vast majority of the United States is considered poor. The average income is slightly more than $45,000 per year.
Heck, by your definition, every country in the world is poor except Luxemburg, which at $109,000 per capita, is just barely middle class.
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ajsthind Posted 7:01 am
17 Apr 2008
It seems then that households are spending much more that 3-5% on gas, even with wage increases and inflation. It is probably closer to 5-7%. If that is the case, a gas tax can be seen in two ways.
One it is marginally not a big increase since the price is already so high and a lot of states tend to do it on a cent per gallon basis, rather than a percent of price basis.
Second, and alternatively, an increase might start to get into the very elastic territory where an extra couple of cents might start pushing out the lowest income consumers who must really face a tough choice.
I would also also wonder if poorer people have to live further away from work than higher income people do. The theory would be that the places closest to work likely have higher real estate costs than those that are far away in the suburbs. I could be entirely wrong, but I have heard that thrown out a lot.
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Tasermons Partner Posted 7:36 am
17 Apr 2008
I have little data on it, but I'd say no. Most people with lower incomes live and work in the inner cities. Whereas people of higher incomes tend to live in the suburbs and commute into the city.
In america, the poor masses aren't shoved to outer fringes of the cities, they're compacted inwards.
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