Want Better Roads? Kill the Gas Tax
Any transportation official knows how to deal with a broken-down car blocking rush-hour traffic: Move it to the side of the road and let everyone else get where they’re going.
This comes to mind as Congress starts work on yet another transportation bill -- only a few months after passing the last one, which was just another in a long series of temporary extensions.
The problem is the gas tax. Set in nominal terms, it has declined in value drastically since it was last increased in 1993 -- even as the price of gas itself has tripled. As a result, both the main Highway Trust Fund and its transit account (often called the transit trust fund) are bankrupt.
Every bipartisan commission that has studied the situation has advocated raising the tax, but a polarized Congress has been unable to do it. Last year’s funding law known as the Moving Ahead for Progress in the 21st Century Act, or MAP-21, even required a $21 billion transfer from general revenue, increasing the deficit but avoiding a tax hike.
A strong, smart, well-funded federal program would be great. But if Congress can’t pass one now, it should just get itself out of the way, by eliminating the federal gas tax entirely and cutting Washington’s role in surface transportation. It would be a big change, but it would streamline government. And it would probably lead to more investment in infrastructure and greener transportation policies.
The basic reason the present system isn’t working is that there is no longer a consensus in Congress on what a national transportation program should be. From 1956 to 1991, the objective was to build the interstate highway system. Then, the focus shifted to highway maintenance and transit. At this point, local interests became more important and the national mission faded. Absent a grand policy, earmarks kept every congressman invested in a big transportation bill; but these are no more.
As a result, “getting back our share” has become the key objective, so that every state now gets as much (or more) money in transportation grants as it pays in federal gas taxes. Along with the money, the federal government issues various rules for spending it, many of which require the states to put in some of their own money, too. It’s common to hear state transportation officials say that the feds provide 25 percent of the money and 75 percent of the hassle.
Eliminating the federal role would enhance state autonomy and streamline decision making. What’s more exciting is that it would also lead to more and better spending on transportation.
In poll after poll, Americans say they are willing to invest in roads and bridges, as long as it brings about improvements they will use. This isn’t just talk; state and local referendums on raising taxes or issuing debt to pay for transportation projects usually pass.
However, people don’t generally support raising the gas tax, for the simple reason that they think their current gas taxes, which are mostly federal, are wasted.
Thus, the federal gas tax has become both a ceiling and a floor. It makes raising state gas taxes unpalatable. And since states get back at least what they contribute, the tax encourages them to keep spending even if they don’t really need more roads.
Getting rid of the tax would force a serious discussion in each state about how, and how much, to fund roads and transit. States could choose to reimpose the same tax, or they could set a different rate based on their desired level of transportation spending. They could choose to raise other kinds of revenue to pay for roads and transit -- such as sales taxes, property taxes, local taxes or tolls. Or they could simply reduce their transportation spending.
Because the biggest states have the biggest needs, this would probably increase investment nationally.
It would also lead to greener transportation policies. Traditionally, environmentalists have supported higher federal gas taxes as a way to discourage driving and fund federal programs for transit and to mitigate congestion. But the current tax -- roughly 6 percent at current prices -- is too low to change consumer habits. And funding formulas that can gain congressional support usually benefit those states with the most automobile-dependent policies.
In fact, the most car-centric states tend to be the ones most opposed to raising the gas tax. Without federal transportation money, they would be the most likely to reduce spending on new roads. Conversely, those states most willing to raise funds for transportation are already the ones most likely to invest in transit, walkable streets or bike lanes.
Ending the federal program would be relatively straightforward. The gas tax and all programs it funds would sunset, perhaps after a few years to allow states time to adjust. This would amount to a $29 billion annual federal tax cut, plus a reduction in the federal deficit of roughly $10 billion per year, because the trust funds would stop overspending. Some 4,000 federal jobs could be trimmed.
Washington’s ability to set national standards for maintenance and highway design could even continue, because of commitments that the states made to the federal government years ago to obtain interstate highway dollars.
Barack Obama’s administration might find good politics in a proposal like this. Evoking Ronald Reagan’s “new federalism,’’ it would position the president as being in favor of tax cuts, deficit reductions and smaller government -- when these things make sense. It would force 30 Republican governors to wrestle with the question of how to fund their own highway spending. And it would be good policy, consistent with Obama’s support for the environment and for rebuilding U.S. infrastructure.
Ending the federal surface-transportation program would be a radical move. But if Congress can’t get in gear, moving its stalled car out of the way of American transportation policy might help us all get where we need to go.
(Rohit T. Aggarwala leads the environmental program at Bloomberg Philanthropies and is a visiting scholar at Stanford University. The opinions expressed are his own.)
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