Planet Gore

BTU-based taxes favor no particular fuel

Anne Korin from the Institute for the Analysis of Global Security responds to Henry Payne’s post below:

I’m baffled by Henry Payne’s statement that I “want a whole new fuel sales tax structure (based on BTUs rather than gallons) to favor ethanol.”

One could easily retort “Henry Payne would like fuel sales tax to remain volume-based in order to favor gasoline and diesel.”
Given the wide variety of fuel options that could be sold at fuel stations — gasoline, diesel, ethanol, methanol, natural gas, etc., each with different BTUs per unit volume — and the fact that fuel taxes are used to fund our highways, wouldn’t the fairest way to allocate such taxes be according to the relative amount that people drive?
The most efficient way to do this would obviously be to shift from a fuel-tax model to strict per-mile tolling (which would also reduce opportunities for pork and corruption in highway fund allocation.)
Assuming, however, that we are stuck with the fuel-tax model for the foreseeable future, can Henry Payne please explain to me why he thinks that a volume-based fuel tax is a more fair and less market-distorting surrogate for per-mile usage charges than a BTU-based fuel tax that takes into account the fact that one can drive different distances depending on which gallon of fuel you are using?

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