When I first started working with the trucking associations, almost 20 years ago, a feature of just about every provincial government budget (up until the early 1990s) was increases in fuel taxes.

The federal excise tax on diesel fuel was introduced by the Mulroney government as a deficit-fighting measure in 1984.

But when the public finally made it known in the 1990s that it would not elect any government that proposed to increase taxes of any kind, the trucking industry and motorists enjoyed a well-deserved reprieve from the pernicious fuel taxes. (The price of fuel continued to escalate, but at least fuel taxes remained constant).

The last time the Ontario government announced fuel tax increases was in 1991. You have to go back to 1986 for the last federal diesel fuel tax increase. (We were told at the time the tax would be folded into the GST once fiscal balance was restored. This never happened).

Let’s start with the U.S., where fuel taxes have always been equated with freedom of mobility.

A number of individual states, including New York, Pennsylvania, Illinois, California and others, have recently raised fuel taxes. Moreover, passage of the U.S. highway funding legislation is being held up over a debate about whether funding for the interstate system should be accompanied by an increase in federal gasoline and diesel fuel taxes.

Some in Congress are pushing for them, while the president says he’ll veto any bill that contains fuel tax increases.

In Canada, B.C.’s government increased diesel fuel taxes shortly after taking office, at least notionally to help pay for infrastructure investment.

And just last month, Ontario Premier Dalton McGuinty issued a “workbook” titled Citizen Dialogue on the Ontario Budget Strategy 2004-08.

It suggests an additional $200 million per year could be raised if gasoline and diesel fuel taxes were progressively increased by one cent per litre in 2005, 2006 and 2007. Ironically, while constant consumption is assumed, this measure appears in a section headed Fostering Conservation and Sustainability of Our Natural Resources.

If the measure is supposed to promote conservation wouldn’t you expect consumption to go down?

Federal Environment Minister David Anderson was also recently quoted suggesting that raising the excise taxes on fuel to reduce consumption and emissions should be analyzed and that the debate over whether taxes should increased has been stymied by special interest groups.

Really?

The various committees and task forces on the issue that CTA has worked on in recent years included all manner of non-business groups. I doubt the average taxpayer wants to see higher fuel taxes any more than businesses do.

Perhaps it’s just that the analysis to date hasn’t provided Anderson with the justification he wants to raise taxes. The 1998 Report of the Technical Committee on Business Taxation, prepared for then – Finance Minister Paul Martin stated: “The existing federal fuel excise tax is not the best instrument for pursuing environmental objectives. The tax base is not closely related to the causes of urban air pollution; neither is the tax base well designed from the perspective of climate change … it would be appropriate to consider broader based taxes on pollutants from a wide variety of sources … the excise tax restructured in this manner would lower the federal rate on motive fuels (and) would level the playing field among major energy sources (to) help to ensure that the costs of goods and services produced by using these sources would better reflect actual environmental costs.”

Anderson has also asked if people believe the split between what they pay in excise taxes and what they pay in income taxes is appropriate, inferring that it would be better if people paid more excise tax and less income tax.

Since there is only one taxpayer, I suppose at the end of the day it matters less to an individual how he pays tax, so long as he does not pay more in combined tax.

Regardless, I find it hard to fathom how replacing a progressive income tax with a regressive excise tax) would be a good thing.

The environment minister also raises the currently fashionable suggestion (at least amongst consulting economists) that motorists do not pay their fair share of the external costs of fuel consumption.

The reality is that this is a very difficult and often arbitrary thing to measure and/or to assess what the optimal level of emissions should be. Let’s not forget the government has introduced regulations on truck diesel fuel and engine emissions that will effectively eliminate smog-related emissions from new engines starting with the 2007 model year.

These improvements will not come without increased costs.

Moreover, since fuel is the first or second leading operating cost for trucking companies, there is a natural, market-driven and constant reason for maximizing fuel efficiency.

What earthly good would raising diesel fuel taxes do?

Instead, governments should be looking at incentives to accelerate the penetration of the new equipment into the marketplace through such measures as accelerating Canada’s out-of-date capital consumption allowances on truck tractors.

– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.