THE ISSUES IN DESIGNING AN AD VALORUM GASOLINE TAX

This article discusses how significant increases in highway construction and automobile-operating costs, and the threat of decreased gasoline consumption by conservation-conscious consumers, has causes some state legislatures to propose a switch from a per-unit gasoline tax to an ad valorum tax. These proposals were designed to collect additional future revenues automatically without the need to seek periodic legislative approval to raise the cents-per-gallon rate whenever transportation costs outstrip revenues. This article presents the results of a study that evaluated the issues in constructing several revenue simulation models as a prelude to a legislative proposal for adopting an ad valorum gasoline tax base for the state of Alabama. The switch from a per-unit tax to an ad valorum tax is a short-run solution to declining revenues from an inadequate tax base. A better solution is the realignment of the tax base so that the costs of desired transportation facilities can be distributed equitable among users.