I came up with an idea recently that seems logical, but which will be difficult to achieve for reasons that have nothing to do with logic. 

Why, I wondered, are fuel taxes based on volume? Things would be simpler if fuel taxes were based on value, as are many other taxes, including sales, income and property taxes.

I had been reading about proposals to increase gasoline and diesel taxes to keep pace with the repair and maintenance needs of Iowa’s 114,000 miles of roads. 

Because Iowa’s fuel taxes have not increased since 1989, news reports said, the state now faces a $215 million annual funding gap for road repairs. 

That gap could be closed with a 10 cents per gallon increase in fuel taxes. The problem is that lawmakers are too gutless to tackle the problem in an election year. 

The problem got me to thinking about fuel taxes and wondering why they are based on volume rather than value, when value clearly has so many advantages. 

Volume taxes are, of course, older. They go all the way back to ancient times, when tax collectors would count how many cows or pigs or whatever a person had and assess taxes based on those numbers.

Value taxes are a more modern concept. They grew out of the money-based economies that developed during the 19th century.

Nobody thinks about it today, but value taxes contain their own inflation hedge.

It works like this: If inflation is 10 percent and the price of the taxable commodity is increasing by roughly the same amount, the tax that’s collected goes up right alongside the price. 

The result is that government does not have to raise tax rates to obtain more money during inflationary times.  

But that’s not true with volume taxes. And it’s especially not true with modern fuel taxes. In fact, today’s volume-based fuel taxes are deflationary. 

Not only do fuel taxes not increase when the price of gasoline goes from $2 to $3 a gallon, but the tax that is collected actually declines because automakers have significantly increased the fuel efficiency of today’s cars and trucks. 
Vehicles that used to get 10 to 15 miles per gallon now get nearly 20 to 30 mpg. 

That means that motorists drive nearly twice as far on a gallon of gasoline, presumably doing twice the road damage on the same gallon of gas. 

The result is that the same amount of tax must now cover more road repairs. That’s how the road-repair funding gap was created. At least it’s one important part of the gap, which is now about $215 million a year for Iowa. 

When Iowa’s gas tax was created in 1925, it was tied to gallons, rather than price. 

That made sense at the time, because it was nine years before the state sales tax was created in 1934. 

The first gas tax was 2 cents a gallon at a time when gasoline cost about 20 cents a gallon, making it the equivalent of a 10 percent value tax, although nobody thought of it like that at the time. 

Iowa’s first sales tax in 1934 was 2 cents on the dollar, or simply 2 percent.

Today, the state sales tax is 6 percent and the fuel tax is 22 cents per gallon, or about 7 percent of the wholesale price of gasoline. Increasing the tax rate by 10 cents a gallon today would give the fuel price the rough equivalent of an 11 percent value tax. 

That’s just one percentage point more than the value tax equivalent of the first gas tax in 1925.

My conclusion: Iowa lawmakers had a lot more guts and foresight in the 1920s than they do today.