We tend to think of the world as static and many struggle to understand that our modern world is pretty recent. You can make a case for automobiles dating to the 1880s, according to Whisbi. But the Stanley Steamer is given credit for much and was initially on the scene only in 1897. Oldsmobile is credited with being the first mass-produced automobile in 1901, according to CarsGuide.com. Ford gets credit for the assembly line in 1908. There is a lot of history in that article. There are those who see 1923 as a watershed moment, exactly 100 years ago.
A lot of history in the last 100 years. Lenin's Bolshevik revolution dates to 1917-1923. Communism in the totalitarian state of Russia, the Soviet Union, and later Eastern Europe is recent history. The Chinese communist party is a little over 100 years old, and the totalitarian People's Republic dates only to 1949. Communism is simply not that old. Totalitarianism is admittedly much older. Britannica's discussion touches on some world history, Czars, Emperors, and Kings; its discussion centers more on authoritarianism and totalitarianism in a modern context. Much of it socialist (Germany and Italy) and communist (Soviet and China).
So, automobiles have really only been a thing for just over 100 years. If you think of the volume of concrete and asphalt out there, we have been pretty impressive with our infrastructure response. Despite all that building, there remain places where persistent road shortages nonetheless seem to persist. Even where the road volume is perhaps sufficient, we hear tales of "crumbling infrastructure" and the need to rebuild. Perhaps to the tune of $2 trillion. That is what some would consider a large number.
Oregon was a big innovator in the automobile. Oregon? The Reason Foundation notes that it came up with the idea of taxing gasoline in 1919. That makes sense. If you are going to build roads, bridges, and parking you will need money. All the states followed along, and the federal government joined the gas tax club in 1932. The national government and the states all collect significant gas taxes on the sale of gasoline.
And, they have grown. Reason Foundation notes that "Currently, state gas taxes range from 14.32 cents per gallon in Alaska to 62.05 cents per gallon in California, not including the 18.4 cents per gallon federal gas tax." The fact is government is addicted to the inflow of revenue from gas taxes. According to Consumer Reports, "Fuel taxes account for 84 percent of federal and 29 percent of state highway funds." Like it or not, gasoline is building all those onramps, overpasses, bridges and more.
Note that these are expressed in "cents." Investopedia explains that these are "excise taxes," and are largely expressed in this volume manner, so many cents per gallon. Despite that trend, "some states charge based on the amount spent rather than the volume of fuel purchased," a "sales tax" model. The per-gallon rate will not keep pace with inflation. There is a big difference between a $.1432 tax in an age when gas costs $1.00 per gallon (14%) and when it reaches $5.00 (3%). This is not calculus. Even I can do this math. As gas prices skyrocket is there any reason to suspect the price of concrete and labor will not? The excise model is designed to fail in this regard.
Notably, the same era dating to the early 1900s defines the age of American workers' compensation. It too was designed by most states to be self-supporting without general tax revenue funding. Assessments (like taxes) are collected on each policy sold. Carriers contribute this way to trust funds that carry the cost of regulatory and adjudicatory services. In some states those funds contribute directly to worker benefits, education, and more. Workers' compensation is clearly socialism in the spreading of loss across large populations. One can argue it is capitalism in that private carriers cover risk and draw profits. But the socialism argument is far more persuasive.
Back to the way gas taxes began as a "user pays" concept. The vehicles would be the customers using the roads, and by taxing the gasoline those who use the roads most pay the most. Drive more, pay more. This was even reasonably logical in the context of commercial vehicles, heavier vehicles caused more wear and tear on those roads, but they require more fuel and thus contribute more to the revenue model. Some will see a simple and logical foundation for "user pays."
But not all the gas tax money collected goes for the facilities, roads, and similarly related needs. Reason notes that 25 states divert funds from their fuel tax collections for other purposes such as bicycle paths, transit projects, police protection, and even education. The gas tax has become a driver of roads, development, and yet more.
And, in a general sense, Investopedia notes that "the revenue raised from gas taxes has failed to keep up with rising infrastructure costs and inflation." So whether from shortfall or diversion, the taxes are not keeping pace with the expenditures. Believe it or not, electric cars are part of this, fuel-efficient cars are part of this, and inflation is part of this. The problem is multi-faceted and complex. See, anything that decreases gas sales diminishes gas taxes. It is simple math.
So road tax revenues have fallen short in recent years. The cars have become more efficient and the gas prices have discouraged travel. The inflation cycle has impacted both revenues in and the cost of projects out. See Inflationary Cycle (July 2023). Despite the revenue shortfalls, "Revenues from fuel taxes were approximately $32 billion at the federal level and $51 billion at the state level in 2021," according to PlugIn America.
In just a few (7) short years, if all goes to the master plan, "50 percent of all new vehicle sales (will) be electric by 2030," according to the
White House. That will mean a great deal of market shifting. As a student of history with a memory of the Cold War, I vividly recall studying the
Seven-Year Plan of the Soviets. It was a take-off from the earlier
Five Year Plans of totalitarian regimes. Some believe the resort to 7 years was an admission that 5-year plans did not work. Despite the many Soviet failures, the Chinese joined the Soviets in their pursuit of centralized market controls. You honestly cannot make this stuff up. Governments have persistently failed to reign markets. You can argue that the socialists did exactly that in those totalitarian regimes, but they will have to face the reality that their central control merely fed the
rise and growth of black markets where capitalism and reality supplemented their failures.
Despite criticisms of totalitarian or authoritarian government, it can absolutely influence the consumption of products. The government can legislate availability to some degree. The U.S. government effectively regulated convertibles out of the market in the 1970s. Oh, you could get them, but you had to buy a regular car and pay an after-market shop to cut the top off (thus a market existed, but not one the average consumer could readily access). The government can
tell you not to grow wheat, force you to buy health insurance, and the list goes on and on. It can make businesses ensure worker livelihood by insuring against workplace injury. That creates costs for all employers that are subsumed within the prices we all pay for goods and services. Workers' compensation socializes injury costs.
While we are not there yet on cars, there are indicators. You cannot buy a car without seat belt alarms, airbags, backup cameras, and soon
impaired driver detection. That is a regulatory path. Government is driving up the cost of goods, enforcing its view of safety, and in the process deciding what we can or cannot buy. I would love to have a car without all that junk installed. Similarly, the federal government has been giving tax credits to people who buy certain EVs
since 2009. With a carrot or a stick, the government can decide what you should buy and strive to convince you. The tax credits are carrots, and one might argue the gas tax is a stick. The higher the price of gasoline, the greater chance you will give in and go electric with less muss, fuss, and angst.
That is worth repeating. The government has used tax money to pay people essentially rebates on cars that do not contribute any road tax revenue. The electric car purchaser enjoys two benefits, tax credits, and fuel tax avoidance. Gas consumers pay for their road and the road used by the non-contributing electric car. In the interest of full disclosure, I have invested some in several electric vehicle manufacturers. The fact is that electric is likely to grow market share with or without Uncle Sam. I am betting, through my capitalist investment, that it will grow and profit.
As the EV population grows, how will electric vehicle owners pay their "user pays" contributions to the roads, bridges, and more? How much do EVs contribute to the road taxes? In the plainest sense, they haven't yet. You subsidized your neighbor's EV purchase and you subsidize its use each time your neighbor drives somewhere. Your neighbor is cruising and you gas users are paying the bill. But various states are now struggling to find a method for finding that fair share, through "revenue replacement" according to
Plug in America. This may come in the form of taxes or registration fee differentials, but it is coming. See as electric increases so decreases the gas consumption and the tax revenue.
That is one complication. The other is the electric supply. I ran into a college-educated scientist one day at a social gathering. The scientist engaged in an argument with an electrician (who installs EV equipment as a regular part of work) about electric amperage, service, and supply. It was depressing. The scientist could not grasp that electricity has to be made somehow, transmitted, stored, and distributed. The scientist literally said, "No it doesn't, it's in my house, I just plug into the wall." A scientist. I kid you not. Let's be clear, electricity does not occur magically.
Where does it come from? Most (80%) of it comes from burning fossil fuels and nuclear. The
alternative fuel folks admit that only about 20% of electricity in America is from "renewable energy," like wind, hydro, solar and similar. But wait, the
central committee says we will have 80% of electricity from renewable by 2030 (another seven-year plan) and 100% by 2035. Many are betting on this. Others have some doubts. Regardless, government has decided on this course. This blog will remain in 2030 (even if I quit writing new stuff). My prediction today is that these seven-year plans of the central committee will not come to pass.
The
LA Times reported this year that California expects fewer "brown-outs" (power shortages) in 2023 after significant investment in its power grid. Some fear that electric cars will create voltage demand, and strain the power grid.
Others cite examples in which EVs have dumped their charge back into the grid in peak demand moments because electricity was needed and otherwise elusive. Of course, that was in the same era that EV owners were
told not to charge their cars in the first place to decrease grid demand. When you are told you cannot charge that car, it will not be of much use to you.
Will there be enough electricity to charge all those batteries? If so, will that energy be more or less efficient than the fossil fuels of today? Will this country spring from 20% to 100% renewable energy in the next dozen years? Will Americans accept nuclear as a solution? On the horizon is cold fusion. It has made
some interesting progress lately. If not, then we will continue to burn fuels in order to generate electricity. As demand increases, we will burn more. The solution in transportation may drive higher costs for electricity generally.
It is all so challenging.
See, the same issues apply to workers' compensation. The inputs, the costs, are all subject to supply, demand, inflation, regulation, and more. There are only so many doctors to treat injured workers. They can each be told by the government what can be charged, but that may simply drive them to treat other patients instead. We can strive to limit the care available, but that may merely drive patients to consume in some other market using her or his own money. We can charge premiums based on payroll (increasing inflow) and yet limit benefits (maximum compensation rate) to deprive high-performing employees of their share. This allows the social insurance system to provide benefits to the lower-earning employee. It is subsidy and socialism.
Back to electricity. Make no mistake, California is an EV place. Its
Governor said that 18% of all car sales there were EVs in 2022. Forty percent of the EVs sold in America are sold in the Golden State. They love EVs in California.
California plans to only sell EVs, 100%, there by 2035. But, who will pay for the roads in an all-electric California? That will be a challenge to face.
But wait, there's more.
Forbes just published an expose of "a shocking new income redistribution scheme" in California. The state has implemented a "graduated" scale for electricity rates. The utilities are working now to implement this Marxist plan: “From each according to ability; To each according to need.” The government is apparently going to share Californian's income information with the utility companies and direct how those companies charge for their services.
The utilities will charge people for electricity based on how much they use (like the rest of the world), a consumption or volume measure. However, the innovation is that the rate will be adjusted based on the income or wealth of the consumer. The more money you make or have, the more electricity will cost per kilowatt. This perhaps fits well with the new "7-year plan" to expand the population of electric cars. It will also help to collect the "more" from those who can pay and facilitate subsidies to others.
But this is not just to charge your car, but to run your air conditioner. It is a graduated rate for all electrical consumption. The person that lives in a
2,000-square-foot house already pays less for electricity than the California celebrity living in
10,000 square feet. That is because of consumption volume. The new price scheme will exacerbate this. This new plan will allow your proverbial neighbor to benefit from you paying more, or for you to pay less because of the wealth of your neighbor. "To each . . . "
Hotels are reportedly already getting into the spirit of EVs.
One is reportedly offering a "free" car charge if you stay there. Well, that is, it is "included" in a mandatory "destination fee" that all guests will have to pay at this hotel, $30.00. So with some clever doublespeak, "offering" becomes a mandate, and "free" becomes $30.00. So those not driving EVs will subsidize those who are (all guests pay the $30.00). And the hotel will charge everyone this new tax whether they want any of the supposed amenities or not. All for the greater good. Perhaps the Capitalists can get along with the Marxists.
More electric cars, more renewable electricity (or nuclear). It is all in the current seven-year plan, or the twelve-year plans. Is Marxist electrical cost the answer?
But, these two plans need not be inextricably intertwined. This Marxist methodology could be as easily implemented with internal combustion. Gas is averaging $5.00 per gallon in California according to
AAA. Perhaps the government there could require that you input your license tag number or driver's license when using a gas pump? The registration would tell them how expensive your car is. If the car is new and expensive, then perhaps $25.00 per gallon. If the car is old or inexpensive, then perhaps $1.00 per gallon. You could pay for your neighbor's gasoline and their electricity.
Wait, this could be even bigger. Why not have cameras at the fast food drive-through, to evaluate your wealth similarly? If you drive a nice car, the "value meal" is $35.00, and if you drive an economy car it is "2.00?" That might even get a few of us out of our cars to walk into the counter? We could link people's tax returns to their credit and debit card accounts. Want a new shirt at the Big Box store? Scan your card. If you make money, the shirt is $100.00, and if you are a more modest earner then it is $10.00. "Oh, brave new world." You could do so much more for your neighbors. They deserve it.
Weight. There is a great point. Harvard says "Roughly two out of three U.S. adults are overweight or obese (69 percent) and one out of three are obese (36 percent)." If you add up the two out of three and the one out of three, you might get 3 out of 3 (Note, I did not attend Harvard). But, this more likely means to convey that 1/3 of us are obese and 1/3 are overweight (those two added together get you close to the 69%, the "two out of three"). How about a scale at the food store? The more you weigh, the more the government taxes your food? Fat people could be made to subsidize food. Thin people would pay less and could thus buy more and vice-versa?
Government could bring a utopian existence in which everyone lives together in perfect harmony. Through regulation and directed taxes, it could coerce us in what we wear, eat, drive, and do. With good seven or twelve or five-year planning and market direction, all inequity and suffering would end. (Sarcasm, sorry).
Folks, socialism was a farce when Marx wrote it. It remained a farce as some of the largest economies in the world repeatedly sought unsuccessfully to engage it (none of Stalin's thirteen five-year plans ever fulfilled their purported destiny; yes thirteen). Socialism remains a farce today. The only thing that has changed over the years is that the epic failures and suffering of Marxism, socialism, and communism have been forgotten by too many and never learned by some. And don't get me started on authoritarianism and totalitarianism.
There is much income re-distribution in America. It exists today in a variety of government programs. It is nothing new. I might argue that as a whole workers' compensation has been spectacularly successful as a cohort of capitalism. It has been a constrained, defined, and predictable method of assuring the costs of injury are in the price of the goods and services that are produced by any business. The costs are real, and it is socialization. It has included detriments (drug-free workplaces, safety device use, etc.). It has included incentives (premium discounts for various behaviors). And it has been less than static with various states engaged in some form of tweak or adjustment over the decades.
But this recent move in California is worthy of study. The implications of such a plan on such a scale are intriguing. The specter of Marxism is apparent. The move toward greater socialism is as curious as it is troubling. We might even reach a point where the American taxpayer bails out people who make poor purchasing decisions and incur loans that they cannot or will not repay. I know a few people who owe more on their cars and homes than they are worth. The government might borrow from our children or tax one segment of society to afford relief for the bad decisions of other segments.
You cannot make this stuff up. But you can think about it. Can socialism co-exist in a market economy? Workers' compensation proves it can, and successfully. But is there a tipping point at which people with means will simply shift their location or consumption to avoid costs and contribution? Perhaps. If nothing else, this latest California experiment will be intriguing to watch. What will the view look like in 100 years looking back?
