Why the Gas Tax Is a Tax – Not a “Fee”

THE DISTINCTION IS VITAL, AND STATE LAWMAKERS ARE WRONG TO IGNORE IT

A common mentality inside the South Carolina General Assembly holds that all private goods and services belong to government. We’re calling this a mentality, not a doctrine or an explicit belief, because lawmakers rarely if ever state it explicitly. But the mentality is there all the same. Consider, for example, the way state lawmakers have begun using the terms “tax” and “fee” interchangeably.

The difference between the two is absolutely vital to understand. A tax, of course, is a levy imposed on private goods, services, transactions, and property. A user fee, by contrast, is a few imposed on the user of a government service. State law, indeed, defines the term user fee: “a charge required to be paid in return for a particular government service or program made available to the payer that benefits the payer in some manner different from the members of the general public not paying the fee.”

‘Motor Vehicle User Fee’?

The confusion has become acute in the debate surrounding the gas tax. We have heard lawmakers argue that funding the much-needed repair and maintenance of our roads would be best done by raising the “motor vehicle user fee” – that is, the gas tax – because this is only paid by those who “use” the roads.

That is a grossly inaccurate way to use the term. The tax on gasoline is a tax on a privately manufactured and distributed product, not a fee for a government service. Roads are a core government function from which literally every citizen in South Carolina benefits, not a special service that only a few fee-paying residents benefit. Pedestrians and bicyclists use the roads without driving on them.

Gasoline, by contrast, may be purchased for uses other than driving automobiles on roads. And drivers from outside South Carolina can and do use state roads without paying what lawmakers are disingenuously calling the “motor vehicle user fee.”

The Attorney General’s office has explicitly contended that the gas tax is a tax and not a user fee. In an official opinion the A.G. held that any governmental charge levied for the purpose of raising revenue has historically been recognized by the state Supreme Court as a tax. “It is apparent,” the opinion reads, “that, for decades, the gasoline tax was recognized for what it is in reality, a true tax.”

The confusion has more than rhetorical or technical consequences, too. The belief that government can levy a fee on gasoline because most people who buy gasoline also drive cars on state-owned roads comes dangerously close to assuming that government owns the gasoline in your car.

Does government own everything?

It does not, and this government-centered mentality ought to be challenged at every point. To understand why, take a look at the long-running debate surrounding the state’s education system. The state’s K-12 public education system is funded through the General Fund, which is composed of the revenue generated by the numerous taxes levied in the state. The revenue appropriated to the schools through the General Fund come primarily from the state’s 6 percent sales tax. The state does not consider public education a special government service to be charged only to the “users” of that service – i.e. parents of children in the public schools. The state, rightly or wrongly, considers public education a service to all the state’s citizens, and taxes all the state’s citizens accordingly.

On the flip side, consider the taxes on what belongs to us. Would homeowners agree to the term “property user fee”? How about “business license user fee”? If buying gasoline is using a government service, it isn’t much of a leap to say government is merely allowing us to “use” our own property or business. It’s bad enough we have to pay taxes on what belongs to us merely for the privilege of owning it; worse that legislators have the authority to take it if we don’t pay. What’s to stop them from finally determining it’s all theirs to begin with?
New definition needed

The state law code needs a narrower definition of user fee. While the law does define the term, the definition only appears in the section on local government, thus making it easier for lawmakers to define the term however they wish in other areas of the law.

There is only one explanation to muddy the terminology, and that’s that legislators want to make taxpayers believe they should pay more for core services of government. Once taxpayers are buy the logic that they should pay more for basic government functions they happen to use more than others – the education system for parents of schoolchildren, roads for people who drive frequently – elected officials will always have a reason to raise those “fees.”

Instead, the basic functions of government should be paid for with the most stable and broad-based revenue source – the General Fund. Only when that happens will legislative budget-writers be constrained to use the money government already has more wisely without extracting more from the “users” of government services.

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