2008-04-05

No Carbon Tax, But Gas Tax Should Cover Car Insurance

Alternative title: Save two birds with one stone.
 
Gas Tax Should Cover Car Insurance
 
After contemplating the pros and cons to road tolls vs gas tax, I realised that much of the same apply to car insurance.
 
-People who drive fast have a higher risk of accidents, but also pay more in gas tax.
-Parked cars are rarely involved in accidents. You don't have to pay gas tax when your car is parked.
-The more you drive, the greater the risk. The more you drive, the more you spend in gas tax.
-Gas tax is efficient. You can't lie about how much you drive, which is (should be) the main factor in determining risk.
-Expensive cars use more gas, so driving one contributes more in gas taxes. Expensive cars usually cost more to insure.
 
Now obviously, taxing gas isn't perfect. However, in New Brunswick (and in some other provinces), insurance companies are forbidden from factoring age and sex, so why not go a step further and take the driver out of the equation totally?
 
Much of the risks of driving are shared. If you drive a heavy car, you are reducing your personal risk, but increasing the risk to others (especially to those driving light cars). Road conditions are also a huge factor. At present, there is no financial incentive to keep roads maintained, to put up moose fencing, to eliminate intersections or to put up medians. There would be a huge financial interest when the government pays every time there is an accident.
 
An alternate to a carbon tax
A carbon tax, as implemented in British Columbia, penalises everybody with the only benefit being, in theory, lowering BC's guilt factor when it comes to global warming. Covering car insurance would penalise people for driving, just like the carbon tax, but there would be a huge benefit, "free" car insurance. The way it is now, owning/leasing a car is expensive, the variable costs of driving are negligible. The cost per km goes down significantly the more you drive. By reducing the more or less fixed costs such as insurance and licensing and increasing the variable costs such as gas, there is a bigger incentive to drive less.
 
The flaw in this argument, of course, is that people who don't have a car are much less likely to drive, regardless of the price of gas. But aas car ownership is sky high, I think the insurance via gas tax has merits.
 
Your comments are welcome.

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