Progressive or regressive fuel taxes
From the Herald
And in a startling revelation, the ministers claim that the wealthier a household is, the more it is likely to pay for petrol. They say the wealthiest 10 per cent of households will pay $7.71 per week more for petrol. Those with the lowest incomes will pay $3.64 a week more.
That’s good to see. And it does contradict the impressions given by some of the opponents of the fuel tax. But it doesn’t address (or even allude to) more detailed criticisms of the tax.
Wealthy households, on average, spend more money than poor households. They spend more on food. They spend more on entertainment. They spend more on cars. They use public transit more. And they drive more. So, on average, they pay more GST, and they pay more fuel tax. That’s not a startling revelation. Even in the US, higher-income households (on average) spend more money on petrol.
In the other direction, any user charge is going to be a lower proportion of income for wealthy than poor households. The regional fuel tax is no exception: according to the statistics in the Herald story, the average charge is only about twice as high for the top income decile as for the bottom. The ratio of incomes is much larger than two. Again, that’s not a startling revelation.
For questions where the answer isn’t obvious, we need more data.
First, we’d like to know the distribution of costs, not just the average. For example, the lowest income bands will contain more people who don’t have cars (who are paying quite a bit less than the average) and, by arithmetic, will also contain some people paying quite a bit more than the average.
Second, if you think of the fuel tax as being a sort of road user charge or a surrogate for a congestion charge, we’d want the amount paid per kilometre driven to be roughly constant. It would be undesirable for low-income household to pay more per kilometre than high-income households. (On the other hand, if you think of it as a carbon charge, it makes sense for it to be based on fuel amount but doesn’t make sense for it to be higher in Auckland.)
Answering these questions takes a bit more analysis. So, I’m going to refer you to Sam Warburton, an economist formerly with the Department of Transport and now with NZIER the NZ Initiative. Here’s his Twitter thread reacting to the story, and here’s his (PDF) submission to Parliament on the taxes.
Politics is about compromise, and it’s possible these fuel taxes are the best of the politically-feasible options, but they aren’t all unicorns and rainbows.
Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »
I guess people who are relatively richer can also avoid petrol taxes by using electric cars/bikes.
6 years ago
Its no surprise that NZ Initiative didnt come to the defence of the poor when fuel taxes ( and GST component) was raised by National amounting to 23.5c from 2010 to 2015
https://www.aa.co.nz/cars/owning-a-car/fuel-prices-and-types/fuel-prices/
Surely there must be more data than
‘ poor people own old, big, shitty vehicles that use a lot of fuel and thus pay a lot of fuel tax.’
A check of any car yard specialising in say under $7K cars would show this to be patently absurd.
https://www.autotrader.co.nz/used-cars-for-sale/auckland/price-5000-7000
Some economists should stick to actual data rather than demonstrating once again
‘who pays the piper calls the tune.’
6 years ago
Sam wasn’t at NZ Initiative then.
6 years ago
I Steve.
I wrote this (https://twitter.com/Economissive/status/1012486484991938560) before your comment, but you might like it:
Further, some snark at National for campaigning against a tax on poor as if National don’t care about that. I think National’s concern is genuine. Here’s why:
Fuel taxes hit the National-voting rural, farming poor just as much, if not more, than Labour-voting urban poor.
I’ll never in a million years vote National.
And their last term in government increased fuel taxes more than Labour’s planning to do, and took a tonne of money off rural regions, gifting it to rich Auckland and Wellington. So they caused much of this mess…
But if they are re-evaluating those policies and coming up with a different answer; one that supports the most disadvantaged in New Zealand, whether Blue, Red or Green, then I’ll work alongside them.
And I’ll work alongside the Labour and Green Ministers if they are open to re-evaluating.
6 years ago
Second.
I combined data from NZTA about all the vehicles in New Zealand’s fuel efficiency with Household Travel Survey data about the vehicles different households own.
The income data in the Survey is rubbish, but the ethnicity and employment status isn’t.
Combined it shows households with Māori, unemployed, and sole parents – all correlated with low income – own relatively low fuel efficiency vehicles AND that they drive more (the ability of rich to drive more must be outweighed by the need to drive more by low income families that tend to be larger, greater fuel consumption from older, bigger vehicles, and less access to public transport).
Thanks for the support.
6 years ago