The recent historic drop in fuel consumption has translated into a $3b drop in taxes going into the Highway Trust Fund year-on-year. It’s a crisis! It’s a good thing that GW Bush signed into law the “Safe, Accountable, Flexible, Efficient Transportation Equity Act” back in August ’05. The Act empaneled the National Surface Transportation Infrastructure Financing Commission (NSTIFCT), and directed it to devise a new way to finance the Highway Trust Fund. Reuters has secured a draft copy of the commission’s final report. NSTIFCT’s recommending that Congress should raise U.S. gasoline taxes by 10 cents a gallon later this month, to “fix bridges and ease congested highways.” But that’s not all! “The gas tax is broken, so any increase in gas tax is just a Band-Aid,” commission member Adrian Moore said. “It gets you through a very short term. It doesn’t even remotely solve the problem.” Actually, the only thing broken about the federal gas tax is that it’s fixed at 18 cents per gallon. The tax hasn’t been adjusted for inflation– or any other factors– since it was last increased in 1993. But Mr. Moore doesn’t point out obvious fixes like indexing the federal gas tax to inflation, or otherwise periodically adjusting the tax based on the needs for highway spending. Anyway, Mr. Moore is down with pay-as-you go, we-know-where-you-are road pricing. Privacy concerns? No worry, Big Brother will not be a government agency, but a consortium of private road builders looking for a profit. Sort of like health insurance companies, only more intrusive. So which would you rather have, private toll roads and FasTrack monitoring everywhere, or gas taxes adjusted as needed to keep our highways in an adequate state of repair? Here’s hoping we get to make that choice.
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I’d go for higher gas taxes than the 18 cents/gal currently. Any measures not tied to gas remove much of the benefit and incentive to produce more efficient vehicles.
I’ll take my gas cheap thank you very much. At the very least let the states decide via voting.
The federal gas tax is a fixed number (about 18 cents a gallon) and hasn’t changed for 15 years. The cost of construction has changed in 15 years. Maybe it needs to be changed to a percent of the price. We have to be careful to not create wrong incentives here. A higher gas price would create a higher tax if it were a percentage.
[sarcasm]
How about making gas free then using RFID plates/GPS/cameras so we can be charged the same amount per mile regardless what we drive! They could even vary charges based on the time of day to get the congestion charging effect in there! That would be really great!
[/sarcasm]
Double gas, triple diesel. Index to inflation. Done.
I expected it to be more Welcome back, Carter…, not Orwell.
this is a no brainer, as Bancho points out above.
A fuel tax based on a cost per gallon (not based on a percentage of the retail price) will tend to stabilize the price of the fuel. It would also provide a more stable and predictable revenue stream, since the amount of fuel purchased is only slightly affected by retail price but the price may vary wildly. Since the feds already tax various fuels, the infrastructure for levying the tax is already in place and in use; to change the amount of tax would require merely a simple act of congress.
A problem with a state tax on gasoline is that–at least where states are small–people will just go across the border. Taxes distort consumer behavior, and a patchwork tax resulting from state implementation would create quite a deadweight loss where people drive farther (spending time and money and polluting) to avoid a tax that merely means that the state has less money then anticipated. A federal tax is much harder to evade. Besides that, much of the infrastructure is federal in nature.
RFID and GPS tracking systems don’t convince people to drive efficiently or to drive efficient vehicles or to use less fuel in other activities (flying, heating their home, driving around in circles in a 200 HP motorboat in the name of recreation). If you are trying to reduce overall fuel consumed, you get the greatest bang for the buck with a tax, which probably means you get the least disruption for a given amount of bang. Congestion pricing, however, might be useful.
For all the “no new taxes” crowd: it’s not a new tax. And besides, you could make the deal revenue neutral by reducing payroll taxes. Oh right… I forgot: many of the rich don’t pay payroll taxes but they have enormous energy bills.
It’s people! We gotta tell them! It’s PEOPLE!
Oops, fell asleep on the couch watching Soylent Green again and then read this…hard time telling what was what.
BTW, Commissioner Adrian Moore is also part of the Reason Foundation, a quasi-Libertarian advocacy group which pushed for privatization at every turn.
Reason is for privatizing parking meters: http://www.reason.org/commentaries/gilroy_20081223.shtml ; private toll roads: http://www.reason.org/commentaries/ybarra_20081223.shtml ;and for putting more guns in the hands of India’s citizens to reduce terrorism: http://online.wsj.com/article/SB122877201598989093.html
They clearly have a political axe to grind.
Increasing tax on cigarettes would be more effective. Unlike gasoline nicotine makes people mentally and physically defendant on it. New jerseys tax on tobacco is equivalent to nearly 15 US gallons worth of federal tax per carton.
http://www.taxadmin.org/fta/rate/cigarett.html
If the Country wide tax rate on tobacco was a flat rate of $2 or even $3 and giving a percentage to the state that would be a great help.
BMW325I:
I don’t smoke, but I do drive. I don’t mind some of the money I spend on gas going to fund highways and infrastructure so that I have good roads to drive on. A gas tax is the easiest and least intrusive way to accomplish this and still have the people who benefit from it pay the cost.
As far as tobacco goes, at least where I live it seems there are fewer and fewer people smoking every day. Raising the taxes on that further just ensures that more and more people have stronger reasons to quit smoking. The problem would reappear as tobbaco tax revenues declined. People can quit smoking. Quitting going to work is a bit tougher IMO.
My only problem with additional gas tax is where that money goes. If it truly goes to fixing bridges and transportation concerns, great! The problem is it often gets bacon appropriations for other things.
I like roads. I like quality, ample lanes, and well maintained smooth roads even more. I’d gladly pay up to 2 dollars per gallon, if it was assured that the money was funneled back to competitive bidding by private contractors to construct roads.
Tapping into that tax for any purpose other than perhaps the move to renewable energy sources must be forbidden.
ttacgreg: Don’t allow them any wiggle room. At 15 cent/gal that’s pretty good. Find out the total amount of revenue that represents and tell me that has been put back into infrastructure. You know it hasn’t.
This philosophy of tax your way out of problems has to stop. The government is waaay too big as it stands now. Reduce the immense waste, allocate the resources properly and the country can rebuild. On the current tax base, no less!
*Ding!* Wha? Sorry, nodded off there for a minute and went into a dream. What were we talking about?
fisher72 :
January 3rd, 2009 at 6:02 pm
My only problem with additional gas tax is where that money goes. If it truly goes to fixing bridges and transportation concerns, great! The problem is it often gets bacon appropriations for other things.
Exactly!
I would prefer that my state, Texas, withdrew from federal highway funding and taxes entirely. The Texas fuel excise taxes would then be raised to the amount that passed through the federal government and more if necessary to maintain highways to federal standards. The current system of federal taxation and pork appears to be inefficient and corrupt.
Toll roads are appropriate for urban areas where it’s almost impossible to throw enough pavement at traffic congestion problems. For these areas, tolls can be adjusted to make the driver demand match the supply of road capacity. However, since I believe that having some excess road capacity is good for the economy, I worry that toll roads, expecially private toll roads, have an incentive to oppose building road capacity that would compete with the toll road.
Part on the tax-by-the-mile think comes from the government being horrified by the thought that their green dreams may actually come true and people start charging their batteries at home. Just look at it, Oregon, the state that wants to electrify its citizenry.
If they need ideas on how to tax people to death, they just should look to Europe. They are the experts.
I’ll take the ‘cut spending’ option, please. It’s downright frightening how many people want more government in their lives and have no problem with additional taxation while our elected prostitutes already manage to piss away every single nickel of taxpayer money.
Sorry to go completely off-tangent, but of federal *income* taxes, you know exactly where it goes. Currently 50% goes to defense. And that *doesn’t* include the Iraq and Afghanistan wars, which we’re borrowing money (I’ll save the sickening details about that) to pay for.
In other words, without GWB’s tax cuts and our misadventures in the middle east, we might even still be running surpluses. I could further sicken everybody with some graphs on effective tax rates of the top 1% of US earners – hint, they pay less than those in the $100-200K/yr earners due to loopholes.
A gas tax indexed to inflation is nothing compared to the tax or budget issues listed above.
fabric,
This is not a tangent. It is a good point. Most Americans don’t get it and that is what the government counts on. They keep raising or placing regressive taxes so that the wealthy do not have to pay their fair share of the taxes. The middle and lower classes spend just as much, if not more, on fuel each year and wind up paying an unfair share of the taxes. If you want to raise revenue, income taxes are the most equitable way of doing so (given loopholes are eliminated or not provided). Wake up America!!!!
I’d like a little less government and a little more freedom, thanks. P.J. O’Rourke nailed it when he said “giving power and money to government is like giving car keys and whiskey to 16 year old boys.”
When I first started paying attention as a teenager in the early 1980’s the federal budget was around $500 billion. After Reagan finished ‘cutting’ spending it was close to $1 trillion when he left office in 1989. When GWB took office in 2001 it had grown to just over $2 trillion and as he leaves office we’re now close to $3 trillion. Frankly I’m not too concerned with government revenues; the problem seems to be on the spending side.
Acd,
You should be concerned about revenues. It seems that the more the revenues, the more the spending. Maybe one of the end the debt guys could show us a graph, but it seems that with the exception of Newt’s time leading the House under Clinton, the more we send in, the more they spend. Cutting taxes hasn’t hurt revenues either AFAIK.
The house and senate both passed the $700 billion bailout bill and conservative (?) GWB signed it without having the revenue–just wait until the final 2008 budget numbers come out and we see the deficit. With their newly found power to control private firms who knows what else will be coming our way. We’re in unchartered waters now. The people who think government should have more control over people’s actions and lives should be ecstatic.
problem is…
The revenue stream is taken for non road uses. Here in the NYC area, the subways and buses are running short of $.
Solution…Congestion pricing ! Toll the Bridges ! raise car registration fees ! All sorts of special taxes taken from car users and sent off to subsidize the money losing mass transit options.
Because sitting in a car, warm and dry is bad, and waiting for a bus in the rain is virtuous.
Meanwhile, the bureaucrats who think this up have state vehicles, with special passes and tags and lights, and feel free to use them when traffic impedes them. Living in NY, I’ve seen this many times.
I relied on buses for two summers to get to a job. The second I could, I bought a cheap car, and even with a rustmobile, life was 100 % better . This has not changed.
I’m a fairly libertarian kinda guy, but the last thing we need to do is to privatize the roads. I’d happily pay an extra 50cents a gallon if that went to fund highway/road and other transportation projects. The infrastructure here in Northern Virginia is embarrassingly poor, if not outright crumbling.
How complex is road funding in the USA? I’m keen to know.
In Australia we have three tiers; nationally important, state and then city/county roads.
National roads get funding from our federally raised via a flat excise on fuel (which doesn’t cover the costs) and income taxes.
State roads are funded from state budgets with their revenues from our national GST (or VAT) 10% consumption tax, plus state’s get grants from the federal government and for special projects.
City/county roads are paid for by resident rate-payers mostly, but they can apply to a pool of state or federal grant money as well.
There are very few toll roads (loss making mostly), and car registration is reasonable.
Trucking (as in articulated prime movers, not pickups) have more expensive registrations but certainly not paying for the road damage they do. Our nation is trying to get more freight onto rail by changing that cost-of-damage imbalance.
Our roads are pretty good compared to what I’ve experienced in many countries and our system results in few arguments. We haven’t solved the political pork problem however….yet.