Saturday, July 29, 2006

Would a gas tax be regressive?

Jim over at OIFS is doing his usual good job of making people uncomfortable--in a good way. As the call for an increased gas tax builds to a loud whisper, Jim notes that opponents are quick to play the regressive card. Put simply, a regressive tax takes a larger percentage of income from the poorer than from the richer. A famous example would be a tax on food. Since poorer households spend a larger share of their income on food, a flat tax would necessarily affect poorer households more by the same measure. This is the reason most state sales taxes exempt basic food purchases. The opposite of a regressive tax is a progressive tax, which taxes something richer households spend a larger share of their income on, like a tax on second homes.

Jim's argument is that a lot of things stick it to the poor. If we avoided all of them, we wouldn't get much done. He offers a neat example that 25-35% of Interstate highway construction expenses are mitigating the costs to third-parties. Why not ask what it would take to mitigate the costs of a $1 gas tax to the poor and then get on with the discussion? Well, let's do it. I looked into the 2004 BLS Consumer Expenditure Survey (CE) to get an idea of the costs to the poor. I'll define "poor" arbitrarily as the lowest income quintile (roughly less than $20,000 pre-tax annual income). That should catch most poor and near poor households.

The first thing I found is the same thing Poterba (1991, paywall) and others have noticed--unlike a tax on food or housing, it isn't at all clear whether a gasoline tax would be regressive. Start with the fact that a full 1/3 of households in the lowest income quintile don't even own a car. Effects on those households would be only indirect via rising prices of other goods (food, mass transit). Then continue up the income ladder to find that the second and third quintiles actually spend a larger share of income on gasoloine than the poor. The two highest income quintiles do spend a smaller share on gas, but the dropoff is much smaller and more gradual than for food or housing. (BLS 2004)

Still, one could argue that even if a gas tax doesn't necessarily take a larger share of the poor's income, the share it does take may be more important (the eat or drive argument). Well, that's a separate debate, but if you agree that the burden is unfairly placed on the poor, then push for a gas tax with mitigation! What would it cost?

Again basing my numbers on the 2004 CE, the average poor household purchases about 400 gallons of gas in a year (1), about half the amount of the average household. Given an estimated 100 million total households currently (Census Current Population Report 1996), a gas tax that increased pump prices by $1 per gallon (2) would impose a direct burden on the poor equal to $400 (400 gal*$1/gal) per household. Since about 20 million households meet my definition of poor, complete mitigation would cost $8 billion.

$8 billion per year sounds like a whopping lot of money, but remember what those Interstate mitigation costs were? A gas tax of this size would raise about $125 billion per year (3). Compensating the poor would represent only 6.4% of the total revenue generated.

What about the effects on the other four quintiles? Well, I note that well over half of those households are college educated, and they spend more than the amount of the tax on "television, radios, and sound equipment" (BLS 2004). I'll bet they can figure something out.

(1) $730 spent on gas [BLS 2004]/$1.81 average 2004 price of regular [EIA 2006]
(2) This would represent a total tax of around $1.56/gal using elasticity estimates from Greene and Ahmad (2005) cited in Econbrowser (2006). This is because part of a tax would be absorbed by gas suppliers.
(3) Given an estimated long-run demand elasticity of -0.335, the tax would reduce gas consumption by about 9.5%, reducing average household consumption to about 800 gallons per year. 800 gallons * $1.56 * 100 million households = about $125 billion in total revenue.

Correction: I got so immersed in the household data I sort of forgot it was only part of the picture. Non-household purchases of taxable gasoline might add another 30-40 billion gallons to the quantity side (EIA 2006). Of course, that just makes the mitigation costs to the lowest income look even cheaper!

Friday, July 28, 2006

(Not) Like Riding a Bicycle

I drove a car today. That was my big news on the phone to Rachel, and she asked, "Wow, how was it?" If the Feds were listening in on that converstation, they probably made a couple of tick marks in the crazy box and went back to watching the ballgame. It had been exactly 10 months since my last drive. Sort of unusual, but I really thought driving a car again would be like going home and eating chicken fried steak--not something I happen to do anymore, but still as natural as going right leg first into my pants. After all, it's not like I grew up in Manhattan without a driver's license. I figure I've driven around 100,000 miles in my lifetime.

Well, as it turns out, driving again was more like going into my pants left leg first. I immediately knew what I was doing and all that, but I was hyperaware of things in a way I sure don't remember. Maybe my first drives were like this; I don't know. This is what I noticed.

1) After a few people in a row gave me weird stares, I realized I was trying to make eye contact with every driver on side streets. If I couldn't, I would slow down and watch them intently, waiting for a move. On bike, it's instinctive that those cars are a potential danger and need to be sized up. In a car, sizing people up is just socially deviant behavior. But, really, who among us is really ready to pull off an evasive maneouver at 50 miles per hour? In a car, we learn to live with a lot of risk. I even hear people say, "Well, at least it would be their fault." On a bike, well, that'd just be stupid.

2) I saw a few (green) traffic lights way late. My eyes were focused low, watching to see what other drivers were doing, watching the curbs and crosswalks. I knew what color the light was by watching the intersection. Only after checking off everything else did I glance up at the light. At bike speed, this works great, and I guess it makes sense. Traffic signals and stopping distance are the least of my worries on bike. I've heard "bringing the focus down" as an argument for roundabouts instead of stoplights, but I only now understand.

3) Those blind spots we get used to as drivers are HUGE. I kept leaning around to see around the windshield pillars. And looking back? Sheesh. I'm definitely spoiled to the bike view.

4) I didn't stop for pedestrians at street corners. Twice. I often get annoyed when drivers do the same to me, whoops. A four lane through downtown with parallel parking is terrible for peds. Why hadn't I noticed that before. There is just too much information for my feeble brain to process, and I'm not that far down the curve. Bulbouts, road diets, lights, clowns on parade--whatever--crossings need something to make peds jump into the foreground. One of the crossings was where our friend Bill was hit. I'm going to be a lot more careful crossing the street.

5) I missed my bike. Maybe it's a sign that I'm a little off-kilter, but I was sort of let down when I crested the big hill and didn't get the rush of a descent. No sweating at lights only to get the cool breeze from moving again. No leaning into corners. It was interesting to drive again after the time off, but that was about enough for one year.

Be safe out there, there's one more nut on the road for a few days.

Tuesday, July 04, 2006

Parker House Rolls

It's nine o'clock as I roll over the Blackfoot River and into Milltown. About a quarter of the 28 miles to Rock Creek are behind me, and I'm starving. I woke up feeling awful this morning, but the 7 rolling miles in crisp air have taken care of that, and now I need to make up for missing breakfast. I pull off at the little local grocery and gas and start grazing. Bananas, juice, one dozen Parker House rolls. It all makes perfect sense as I check out. Then I get out to the bike, finish off a banana and juice and think, "What is a Parker House roll?" and, more importantly, "Why did I just buy a dozen of them?" The answer to the first question is a sweet, cheesy roll which--according to the ingredient label--may or may not contain jalapeños. Hmmm. The answer to the second question will come in time, I decide. I stuff a roll in my mouth, one in my pocket, and the rest in the burgeoning saddlebag, and ride off.

The frontage road is familiar and really only interesting for its destination. My mind wanders with the miles. I snap an uninspired picture of the flat, straight road. The camera batteries die. Ten miles later, I'm sitting up eating a banana when two friendly roadies greet me as they pass. They are a neat sight, legs spinning 100 RPM in unison as they take turns in the lead. I finish the banana and decide to give chase toward Clinton to break the monotony. As it turns out, they aren't going as fast as they look and 20 miles per hour steadily closes the gap. I decide to hang back a bit but keep the gap steady, since I'm sure I couldn't keep up for too long.

As we near Clinton, I hear a truck approach behind--the first vehicle in a long while. It honks twice. Ever the dork, I wave and smile, figuring it's a student or someone I know from town or just someone who likes my flyrod-on-bike setup. As the truck roars past, I realize the driver's agitated. Ahead, the roadies have slowed and are chatting side by side. The truck keeps a straight line toward the cyclers and lays on the horn. The roadies pay him no attention. This isn't good, I think. The lack of response seems further to agitate the driver, and he accelerates toward the riders and blasts the horn. Just in time, the truck swerves out, gives another horn blast, and passes with little margin for error. The outer roadie flinches away a bit and seems confused. The truck roars away.

The roadies probably shouldn't have been riding side-by-side. The truck definitely had no business endangering lives for no reason. On a quiet, friendly frontage road like this, where's the harm in swinging around to pass a couple of bikes? I wonder if the driver pulls the same maneuver on farm equipment using the road. From my vantage point, there's probably a driver that now feels justified in his hunch that cyclers think they "own the road." He'll probably be even more hostile to any rider he sees in the future. From the roadies' vantage point, I imagine they think they were buzzed by another nut behind the wheel for no reason. I feel I've witnessed the world worsen just a bit. It's so hard to communicate when private autos are involved that social interaction can break down instantly.

After a hill, I peel off from the roadies to get on I-90 for the last quarter of my ride, and they continue straight on the dead-end frontage road. I hope that the truck isn't waiting in town for them. Without the rabbits, my pace slows to my usual cruising speed of 15 miles per hour. A couple of miles up the interstate, I spot a very animated hitchhiker. He follows through with the thumb on each passing vehicle, and then spins and throws up his arms in disbelief when each refuses to stop for him. When I drove, I never picked up a hitchhiker, but as I approach him on the bike, I realize I'm in a totally new social situation. Driving past in a car, the idea of stopping to say hello to a hitchhiker seems completely absurd. On the bike, the idea of sneaking past behind the guy without saying anything seemsequallyy ridiculous. It would be like walking past someone on my walk into work and looking the other way, pretending not to see them because I'm so enthralled by this tree bark. You know the feeling. So, I stop the bike right in the middle of one of his hilarious, dramatic spins of disbelief.

"Good morning. Where ya headed?" I ask.

"Headed to Deer Lodge [about a hundred miles east], man, but the miles are going slow. Where you headed?"

He's in his late thirties, long hair, but healthy and fairly clean cut. He could walk into any restaurant in Missoula without raising eyebrows. He doesn't have any luggage.

"I'm just pedaling up to Rock Creek to spend the day."

"Oh, man, I wish I was headed there. I love the creek. That's a fine place."

"Doesn't look like you're having much luck out here."

"No, man, I've been out here two hours and can't get a lift. Hundreds of dollars in my back pocket [pats back pocket], and I can't get a lift. I don't understand these people, man."

I think to myself that those people he's raising a thumb to don't understand him either. Anyone who's walked or bicycled on a road shoulder realizes all too well how much autos insulate against the noise and pollution outside the glass. Standing on this interstate shoulder, I realized just now that the price of that insulated comfort is isolation. In an auto, we're reduced to interaction by impotent horns, lights, mimed gestures, and occasionally threatening each other with two-ton contraptions we actually can't afford to damage. The agitated truck driver earlier attested to that. Autos turn public space into private. Because it's so normal to most of us, I think we've come to view it as a good thing. As in, "Thank goodness I don't have to deal with this nut on the side of the road." This guy really made my day, though. And, I now had the answer to my question.

"Say, I just bought way more rolls than I need. Would you take half a dozen from me?"

"Sure, man, what's in 'em? Maybe some mushrooms? A little hashish, huh? That's what we need."

I laughed and passed him six rolls, which he stuffed in his pockets and began eating. We wished each other luck and parted ways. As I rode off, he yelled after me.

"You know, I should get me a bike. Hey these rolls are good!"

The world had just gotten a little bit better. I flatted on a staple a little ways up the road, but it was an easy fix. I had a wonderful day of fishing on the creek and a beautiful ride home in the cool of evening. The travel time for the 60 miles or so was about four times what it would be in a car, but as usual, it was worth every minute. And, I had every reason to stop for ice cream halfway home.