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The flaws of the nickel gas tax

President Reagan is overlooking a historic opportunity to promote one of the goals most dear to his heart - to expand and make more efficient the operation of the price mechanism and private markets. This he could do by revising the structure of highway user charges and requiring truckers to pay for the damage they inflict on the highway network. Instead, to solve the problem of rapidly deteriorating roads and bridges, an objective which is being confused with the goal of new employment of 300,000 workers, he is imposing the 5-cents-a-gallon tax to generate funds to pay for the much needed repair.

A true believer in free markets must hold that any activity should continue without restriction up to the point where every consumer or producer is willing to pay the incremental cost he imposes on society. Until his gain is just equal to the cost, society receives a net benefit because he does. But the most critical objection to the present highway user charge structure is precisely that there is no connection between the price being paid and the incremental cost imposed, i.e., the damage that the user does to the network.

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The axle-load/damage relationship was made most explicit 20 years ago in studies which were virtually laboratory-controlled experiments near Ottawa, Ill. (The location is a fortuitous reminder of the as yet overlooked relevance of the tests for Canadian user charge design as well.) The essential result of the road test conducted by the American Association of State Highway Officials (AASHO) was the ''fourth-power'' law; that is, the relative damage imposed by two different axle-loads is approximately equal to the fourth power of the weight ratio: if one load is 50 percent higher than a second (ratio of 1.5) the damage ratio is 5, i.e., the first truck does 400 percent more damage.

But while the challenge of determining empirically the damage relationships was successfully met, in Illinois, in the ensuing 20 years the challenge remained of summoning the will and of finding a low-cost method to implement these results. Increasingly as the road network deteriorated, major federal organizations, including the Department of Transportation and the Con-gressional Budget Office, recognized the problem and focused attention on the need to review highway user charges.

There are at least two major flaws in the present structure: (1) Fuel charges generated within urban areas, on K Street, for example, are lumped together with intercity revenues for use on the interstate system, and (2) traditional truck charges all have the property of encouraging higher axle loads because the price paid decreases with increasing size rather than increasing exponentially as it should. The new nickel tax will only reinforce both these defects.

Nor will the bill's provisions for increased heavy-truck license fees and higher tire taxes on large tires do the job. Indeed, they may even be counterproductive; the latter may induce truckers to use fewer tires and do more damage per unit weight: For example, the AASHO single-axle coefficient is around seven times as high as the tandem coefficient for any weight. And the higher registration fee will be a fixed charge that truckers will be anxious to spread over a larger annual mileage whose extra damage may not be compensated for by the increased fee.

Traditionally, as noted, highway user charges per ton-mile have all decreased with increasing axle weight. When the ton-mileage is weighted by the damage coefficients (all traffic being converted into equivalent damage units), this is even more true. These traditional charges include, first, registration and license fees and, second, sales taxes on parts and fuel taxes. These are essentially time charges and physical consumption charges.

Recently, states have been experimenting with ''third structure taxes'' designed to cope with the AASHO damage relationships, and initial results are promising. The particular mechanism varies from state to state, possibilities ranging from colored license plates in order to trigger different tax charges at the pump to periodic payments by trucking firms based on information filed as annexes to the reports that they must already file for the distribution of out-of-state fuel tax revenues. The state of Oregon has had special success with this procedure, administration costs amounting to only 3 per-cent of total tax revenues. Thus the oft-feared high collection costs that have long been an obstacle to serious consideration of user charge rationalization is seen to be inconsequential after all.

Roads need repair. And unemployment should be reduced. But it would be more efficient to hire the workers and pay for them out of general tax funds than under the fig leaf of the 5-cent tCx which, once instituted, can be expected to remain part of the tax structure, exacerbating the irrationality now existing. And President Reagan's use of the term ''user fee'' to distinguish this program from other make-work programs is unfortunate since it will further obfuscate the issues in the public mind, just when responsible agencies were beginning to make us see the light.