What are the Republicans thinking? Coming right out of the gate, at the start of the new GOP-controlled Congress, they began talking about the crazy idea of increasing the gasoline tax. It has little chance of passing, yet can easily taint the party with a tax-raising reputation.
Just two days after the swearing in of the new Congress, the January 8 Wall Street Journal (WSJ) headline reads: “Senate Republicans: Higher Gas Taxes are on the Table.” It states: “Senate Environment and Public Works Chairman James Inhofe (R., Okla.), who just took the reins of the panel, said he is open to considering raising the gas tax as a way to help pay for the dwindling Highway Trust Fund that keeps up the nation’s roads and other transportation infrastructure.”
Many of Inhofe’s Senate colleagues are clear about gas tax increase’s future. According to the Associated Press (AP), Senator John Cornyn (R-TX) said: “I don’t know of any support for a gas tax increase in Congress.” The WSJ cites Senator John Barasso (R-WY), “who said he doesn’t support an increase and doesn’t think there is a political appetite for doing so on Capitol Hill.”
The House isn’t any more optimistic. According to the AP, Speaker John Boehner (R-OH) doesn’t think there “are enough votes in the House for a gas tax increase.” Rep. Bill Shuster (R-PA), the House Transportation and Infrastructure Committee chairman, said: “I don’t think there’s a will in Congress and the American People don’t want it.”
Even the New York Times touts: “Gasoline-tax increase finds little support.”
However, Inhofe’s apparent willingness to consider an increase in the gas tax, along with Senators Orin Hatch (R-UT) and John Thune (R-SD), has given fodder to those who long for a carbon tax. A San Francisco Chronicle article titled: “Odds of gas-tax hike grow with quiet support of GOP Senators,” opens: “With Washington’s most famous climate-change skeptic expressing interest in raising the federal gasoline tax, Bay area Rep. Jared Huffman sees an opening to grab the brass ring of the environmental movement: a tax on carbon.” Huffman sees that “it’s a good time to make the tax a little more sophisticated so it reflects the carbon content of all fuels.”
The gas tax creates headlines because the Highway Trust Fund (HTF), which finances the interstate highway system, faces insolvency due to spending more than it takes in. Had Congress not come up with a solution to the $16 billion shortfall by August 1, 2014, federal highway projects would have ground to a halt and as many as 700,000 people would have received lay-off notices. An agreed upon “patch” put the crisis off until after the elections. That fix ends in May and the new Congress must now come up with another way to fund America’s roads and bridges. A gas-tax increase is the obvious solution as the concept means those who use the roads most, pay for them—supposedly making it more of a “user fee” than a tax.
The tax is currently 18.4 cents a gallon for gasoline and 24.4 cents for diesel—more than double the oil companies’ profit on that same gallon of gas. (Note: the gas tax is a flat figure, not a percent. With lower prices, people are driving more so revenues should be up.) With gasoline prices at historic lows, many think now is the time to raise the tax, as it will hardly be noticed.
But there are other options that don’t require raising taxes—or instituting a new carbon tax.
The fact that modern cars are more efficient than they were when the gas-tax was first instituted in 1956 at 3 cents a gallon is a major problem with HTF funding. Because drivers now go farther on less fuel, the roadways receive wear and tear without enough taxes collected to cover the use. As more electric cars fill our roads, the problem is exacerbated. Electric cars use the roadways for free while everyone else pays for them. Therefore many have proposed a mileage fee rather than a gas tax—or in addition to it. With a voluntary program passed in 2013, Oregon has been at the forefront of what is called mileage-based user fees (MBUF). The pilot program, which takes advantage of smart technology, has been hailed as a great success.
However, MBUFs should concern everyone concerned about more government involvement in our lives. At the Detroit auto show, BMW sounded an alarm about the “fine line between performance and privacy.” While the Financial Times (FT) report focuses on the pressure carmakers receive from technology companies and advertisers who want data collected by “connected cars,” one doesn’t have to be a conspiracy theorist to imagine the data collection morphing into a big-brother-like intrusion. According to the FT: “About two-thirds of today’s new cars have sensors and communications systems that send and receive data.” At last year’s consumer electronics show, Jim Farley, then Ford’s head of marketing, said: “We know everyone breaks the law. We know exactly when you do it because we have a GPS sensor in your car.” Imagine Environmental Protection Agency officers showing up on your doorstep because you have driven more than the allowed amount. Or, more likely, your gas supply getting cut off because you used up this month’s allotment early.
MBUFs may serve as a good option for electric vehicles, but implementation should not be universal—and therefore do not create the full answer to the HTFs funding woes.
The answer requires an understanding of the problem.
Gas taxes used to be more of a user fee—which made it fairer. “But since the 1990s the Highway Trust Fund has come to fund much more than new roads and bridges and highway maintenance,” claims a WSJ editorial. Heritage Foundation transportation and infrastructure analyst Emily Goff believes the problem is: “Spending priorities are determined more by politicians appeasing special interests than local needs or consumer choices. And the federal regulatory burden delays projects and smothers state and private-sector innovation.” She points out: “Washington diverts more than 25% of that money to subways, streetcars, buses, bicycle and nature paths, and landscaping, at the expense of road and bridge projects.” Users of these HTF projects utilize the infrastructure but don’t contribute to it. Cutting non-highway spending would go a long way to closing the funding gap. As the WSJ puts it: “Simply using the taxes that are supposed to pay for highways to, well, pay for highways makes the HTF 98% solvent for the next decade, no tax increase necessary.”
Another part of the solution, would redirect highway projects to the states. Chris Chocola, president of The Club for Growth, explains: “All 50 states have Departments of Transportation. More than 70% of all transportation spending in this country is already financed and spent at the state and local level. Each state has very specific infrastructure needs, and those needs are most effectively addressed at the local level, where those making the decisions are held most accountable by the taxpayers.”
States can more easily innovate and have already solved some highway issues with toll-concession private-public partnerships (PPP). Douglas Holtz-Eakin, head of the American Action Forum, a conservative advocacy group, and a former director of the Congressional Budget Office, sees creating more PPPs as an alternative to an increase in the gasoline tax.
A Reason Foundation FAQ on Toll Concession PPPs explains them this way: “A toll concession is a DBFOM (design-build-finance-operate-maintain) highway contract in which the principal funding source is tolls charged to users of the highway project. The projected toll revenue stream is used to support long-term revenue bonds, in addition to covering operation and maintenance costs of the project. In a toll concession, the consortium that wins the right to do the project takes on the risks of (a) construction cost overruns, (b) late completion, and (c) inadequate traffic and revenue. Those risks would otherwise be borne by the government (and hence, the taxpayers).”
I’ve outlined just four possible options to fund our roadways without raising the gas tax—which will still exist when gas prices go up and impacts the price of almost everything:
- MBUFs for electric cars;
- Limit spending to actual highway projects—not mass transit or nature trails;
- Redirect some projects to the states; and
- Toll concession PPPS.
Surely, the great minds in Washington could come up with more ideas.
With several options available to support the nation’s highways, the GOP needs to create, innovate, and unify in fixing problems—like the HTF—and show America that they can do it without raising taxes.