This is a good video shared by Congressman Thomas Massie (R-Ky.) on his page to discuss the building of a wall. If one can extrapolate this to an increase in a gas tax, being rather inelastic to Tennessee drivers and consumers, while being more elastic to travelers through the state, an increase in the gas tax will create a greater burden on Tennesseans than targeting out of state travelers via a “user fee”.
Being inelastic, most Tennessee drivers will not alter their driving habits and gas usage. Being more elastic, out of state drivers have the ability to fill up in other states. Thus, the majority of the 300 million dollar gas tax increase will be paid for by an even greater extent by Tennesseans than those with options.
Additionally, the cost of consumer goods in Tennessee will increase accordingly, especially depending on the elasticity of demand of those goods. Inelastic goods like food, for example, will increase in price, as the supplier can offset the increase in their cost to supply the goods onto the consumer. A 55 million dollar decrease in the grocery tax will be offset by an increase in the cost of the inelastic groceries by the supplier.
More elastic goods and services that are purchased with discretionary income will decrease in demand, as discretionary income of Tennesseans decreases due to increase in the cost of inelastic goods(gas and food). Those businesses and industries will be unable to offset the increase of their products and services. Those small businesses, entrepreneurs, and workers will be impacted to a greater extent than others leading to decreased profits, wage stagnation, and decreased ability to grow or expand their businesses and services.
Just my 2 cents……or 7 cents.
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