Drivers Should Pay For the Roads They Use
This article originally appeared in RealClearMarkets.
The Highway Trust Fund, which has a projected 10-year deficit of $172 billion, is due to run low in July, and if nothing is done the administration will have to reduce funding for states for transportation projects beginning August 1. Congress is considering replenishing the fund from general revenues.
This would be misguided. It is time for drivers pay for the roads that they use, either by charging for miles driven, or by raising the gas tax. Even better, the Highway Trust Fund should be devolved to the states, which can use whatever means they choose to raise revenue.
But with the House Ways and Means Committee's approval of a $10.5 billion cash infusion to the Highway Trust Fund last week, Congress is likely to go the short-term route to fix the nation's infrastructure funding problem. The Committee’s proposed bill would fund infrastructure with a combination of smoke-and-mirrors changes in pension funding and customs user fees, and a transfer from the Leaking Underground Storage Fund.
Although this averts the need for the administration to reduce funding for roads and bridges in August, it has two major flaws. It is a short-term solution, yet another Band-Aid on a long-term problem. Plus, it forces the general public, rather than drivers, to pay for drivers. Just as with any other commodity, roads should be funded by those who use them in proportion to how much they drive.
The fuel tax has grown to 18.4 cents per gallon for gasoline and gasohol and 24.4 cents for diesel from 3 cents per gallon in 1956. It is still not enough to reimburse states for transit projects.
Revenues to the trust fund have declined as cars have become more fuel-efficient. This is projected to continue as people replace their old cars with newer ones. During the Great Recession, Americans drove less, but this may change if the economy improves and gasoline prices decline. With gas near $4 a gallon, people are reducing their trips.
One sensible solution to the Highway Trust Fund’s declining revenues has been proposed by Representative Earl Blumenauer, a Democrat from Oregon. On Friday he gave a speech at the Center for American Progress proposing to replace the gas tax with a fee for miles travelled. More fuel-efficient cars, and electric cars, would pay the same amount for roads as gas guzzlers. That makes sense because they impose the same costs on roads and on other drivers.
Rep. Blumenauer said, “Now the time is right to replace the gas tax because it’s no longer an accurate reflection of road use and benefit because of these wildly changing fuel consumption patterns and replace it with a vehicle mile travelled fee, regardless of the choice of vehicle fuel. That technology is available.”
His bill, the Road Usage Fee Pilot Program Act of 2013, would set up a Road Usage Fee Pilot Program to make competitive grants to transportation authorities in federal and state governments to conduct pilot studies on replacing the gas tax with mileage-based fee systems. Such pilot programs have been already conducted successfully in Oregon. These revenues would fund transportation infrastructure.
Rep. Blumenauer’s companion bill would increase the gas tax to 33.3 cents per gallon between 2016 and 2024 while mileage-based fees were being developed. After 2024, the nation would transition to a fee on miles driven.
A tax on vehicle miles travelled would be more efficient than a gas tax. Not only would all drivers pay, but the charge could vary depending on the time of day of travel and the roads used so as to reduce congestion and make traffic flow more smoothly—lowering travel time and reducing emissions. Traffic moves faster if only a small percentage of people shift their trips.
But this proposal is unlikely to pass Congress. People are concerned about government tracking, even though taxing the miles you drive does not have to mean that the government, or any other entity, knows where you drive. Rep. Blumenauer is a Democrat in a Republican-controlled Congress, making it unlikely that his bill will make it out of committee.
Alternatively, Senators Bob Corker (R-TN) and Chris Murphy (D-CT) have proposed raising the gas tax by 12 cents a gallon over two years, and then indexing it to inflation, to replenish the Highway Trust Fund. This appears to be more likely to pass because it is bipartisan.
A gas tax to refill the Highway Trust Fund should be more properly regarded as a user fee than a tax. Road users cause wear and tear on the roads, road repairs need to be funded, and the Highway Trust Fund is the only major funding mechanism that America has at the present.
Many improvements could be made in the design of the Highway Trust Fund in order to get more bang for the gas tax bucks. Its current design originated through lobbying from different interest groups, rather than from any tax efficiency grounds.
The Highway Trust Fund comes with expensive federal laws and regulations, including requirements for environmental impact statements that add years to project construction.
For instance, the Department of Transportation should no longer require states to use gas tax funds to pay for mass transit. About 15 percent of trust funds go to mass transit. Some states, such as New York, Massachusetts, and Maryland have extensive public transit systems. Others, such as Nebraska, Kansas, and Montana, do not. It is inefficient to place the same mass transit requirements on all states.
Additionally, workers employed on projects funded by the Highway Trust Fund now have to be paid at higher wage rates, either through the Davis Bacon wage scale or Project Labor Agreements. This results in fewer projects and higher costs for states. An improved policy would let the states choose their own wage scales as long as they comply with the Fair Labor Standards Act.
The shortfall in the Highway Trust Fund gives Congress a perfect opportunity to pass a better system, such as charging drivers for miles travelled. As Chicago Mayor Rahm Emanuel said in 2009, Congress should not let a good crisis go to waste, in this case by throwing yet another Band Aid on infrastructure construction.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.
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