Originally Posted by 202_Cyclist
I could go on and on but we could significantly reduce (perhaps by half) our consumption of oil if we made a few choices and decided to price the externalities of consuming oil.
But it's difficult to base your funding around that. You tax gasoline more heavily, over time people will switch to more efficient cars, and you will see diminishing returns from the gas tax, despite the growth of driving. Taxing externalities is a good idea, but you really can't use the tax revenue as a sustainable income source because the tax changes behavior greatly.
The gas tax worked as a consistent funding mechanism for so long because Americans weren't pushing very hard for efficient cars, and Detroit wasn't about to spend serious money developing the technology when they could make more money offering new designs and new amenities. This meant that fuel efficiency stayed the same for decades, and the gas tax revenue grew in direct proportion to the growth of auto travel, allowing highway construction to keep pace with the demand for highways.
But now that fuel-efficient cars are the new norm for personal vehicles, it will be difficult to choose a tax rate that can support the demand for new highways and transit without placing a heavy, heavy burden on those that have not or cannot switch to fuel-efficient vehicles, like small businesses and trucking companies.