Plan B Forum

It is difficult to understand how thinking people can even be against it; to fund the federal hwy system at the same level as 1993 we need to raise taxes to account for inflation and the increase in fuel efficiency. It is so simple:


http://www.bloombergview.com/articles/2 ... unking-out

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These economic gains are in danger. Since 1993, the U.S. federal gasoline tax has been 18.4 cents a gallon, which finances the Highway Trust Fund. Adjusted for inflation, the tax is now about 10 cents a gallon. Unlike most user taxes, it isn't indexed to inflation. As costs for repairs have increased, revenue to pay for ordinary preventative maintenance and repairs has failed to keep pace.

The U.S. interstate highway system, once the envy of the world, is in mediocre and deteriorating condition today. The states have no room in their budgets to cover the shortfall. About half of the states have gone 10 years or more without any increase in their own gasoline taxes as well.

A proposal to raise the tax 15 cents a gallon was introduced in the fall, but it has gone nowhere.

I am at a loss to explain the opposition to this. Regardless of your views on income, corporate or estate taxes, this is simply a user tax. The more you drive on roads, the more you pay in gasoline taxes. Some people may feel like they are over-taxed, but not when it comes to gasoline. The U.S. has the third-lowest gas taxes in the world. Only Kuwait and Saudi Arabia are lower.

yrs,
rubato

What we ought to do is chuck the outmoded, misdirected "user fee" model for funding federal highway monies entirely. The fact is that every single person in this country who uses any deliverable good or service, and/or who travels by any means other than by foot for any reason (which would be everybody) benefits from well kept up roads.

The gas tax is a regressive tax, hurting lower income people the most; it should be eliminated completely. Anything that can be done to reduce energy prices boosts the economy; low energy costs are just about the best bang for the buck stimulus for the economy we can have. Government at all levels should aggressively pursue polices designed to drive energy costs as low as possible. Raising taxes on gas or any other energy source is exactly the wrong approach.

To raise money for the federal highway fund, I would replace the dollars brought in by that ill advised tax with a novel approach; I would take a percentage of the dollar increase in overall annual tax revenue and dedicate it to the highway fund. (I'd have to look at the dollars involved more closely to know what that percentage would be, but that's the model I'd use)

It makes perfect sense; government revenues rise when the economy is growing, more people are working, production and construction are rising, etc. All of these things also increase highway use, and the need for up- keep dollars.

Overtime this would also create a "bank" of funding in good times that would be available during recessions when government revenues aren't rising. This approach would also build into the system an affirmative incentive for the government to pursue pro-growth policies, which would be another benefit. (As opposed to the anti-growth, regressive strategy represented by the gas tax)

This may be one of those ideas that just makes too much sense to ever be implemented by our dysfunctional government. Many Republicans would love the idea of eliminating the gas tax, but would balk at the idea of dedicating a fixed percentage of revenue increases, regardless of the deficit, and without any corresponding spending cuts. Many Democrats would love to have more government money to spend without having to cut anything, but would squeal like stuck pigs over the idea of eliminating a tax, since reducing the tax burden is something that they apparently see as morally repugnant.

I don't think I philosophically agree with you on the basic principle that the roads should be a general funding obligation of government, rather than funded by the users. However, I know that the quickest way to an even worse road system would be to make the roads a general governmental obligation and eliminate the dedicated funding source. In the real world of politics, the best of intentions are chewed up and spit out -- heck,even with a dedicated funding source, dollars are siphoned off for numerous projects that have little if any benefit to the roads and users. Imagine if the road system had to compete with all of the other uses of government funds, those pot holes will become sink holes.

Long Run, my proposal creates a dedicated funding source; a fixed percentage of the growth in government revenues. That money would go directly into the highway fund. I'm not eliminating dedicated funding; just replacing one revenue source for that funding with another.

I think user fees make sense when you're talking about something narrow and specific, (like staying in a national park, for example) but not when you're talking about something that has the broad all pervasive impact of the interstate highway system.

Every man woman and child in this country is clearly a beneficiary of that system, whether they personally drive on it or not.

Fair enough, but I still think the idea will get you put out in the archipelago next to Replace Income Tax With Consumption Tax Island, Privatize Social Security Reef, and Terminate Ethanol Subsidy Atoll.

Dare I say that the gasoline/Diesel fuel tax is the most equitable possible allocation of the cost? Isn't it obvious? The miles you drive and the weight & efficiency of your vehicle are directly correlated to the amount of fuel you use and hence the fuel taxes you pay. Electric cars excluded.

And I hate to say it, but if the current rate of fuel tax is insufficient to cover the cost of maintaining our national highway system, tolls are probably the best way to supplement that tax. Modern technology makes collecting tolls a breeze. Why make the general public foot the bill? Confine it, as much as possible, to those who use the roads.

On a related topic, one might well question the huge public investment in mass transit, at least 75% of which is paid for by PEOPLE WHO DON'T USE IT. Transit is, according to inside sources, a 57 Billion industry, but almost half the U.S. population has no access whatsoever to mass transit. And only a small fraction of the total cost is covered by the Fare Box.

I'm an avid supporter of public transit, but I don't think the cost of it is fairly distributed under our current models.

Perversely, I agree with the rubato person that the gas tax is too low. It was stupid to peg it at a cents-per-gallon rate in the first place. It should be a percentage of something.

graphics are just so ... illuminating sometimes:


http://www.washingtonpost.com/blogs/won ... y-too-low/




yrs,
rubato

So rube and Dave both favor a regressive, archaic and outmoded way for financing the interstate highway system that ignores the obvious fact that every single man woman and child in this country benefits from a well maintained transport system regardless of whether or not they ever spend even one minute driving on it...

Rather than consider a creative and logical alternative approach...

Would either of you care to dispute this statement?:

The fact is that every single person in this country who uses any deliverable good or service, and/or who travels by any means other than by foot for any reason (which would be everybody) benefits from well kept up roads.

I've read that when the federal gas tax was first instituted it was supposed to expire after the interstate system was in place. Not sure how they planned to fund the upkeep -- probably thought the states would do it. However, like most taxes, this one never went away and grew over time, though as noted, it has not grown as fast as some would like.

While it is no doubt true, that everyone benefits from the interstate system, the key point is that they benefit more or less. The majority use of the interstates as far as I can see are the commuter, errand runner, or a vacationer where the use benefits only them. There is no generalized benefit, other than to the extent that most everything anyone does creates some level of economic activity. Why shouldn't the users in this case pay their way? You may argue that the lower-incomes have a harder time paying their way, but this is true about everything they buy; why single out transportation for a special subsidy, especially when it means that all the users that can pay their way get a free ride (paid for through the general tax you suggest, and thus, the people that choose to drive a lot and use a lot of this resource are subsidized by those who do not).

Then there is the commercial use of the federal highway system, from which everyone benefits, more or less, depending on how much stuff you buy or benefit from that is delivered by trucks. Presumably, the tax makes it more costly to bring those goods to market, and thus, adds to the costs of goods everyone buys. This makes sense to me. The costs of the goods I buy should reflect the cost of bringing it to market which includes the cost of maintaining the highway system. Otherwise, there is a subsidy for goods that are transported, and the longer the transport, the bigger the subsidy. Aren't we, as economic conservatives, generally in favor of not distorting the market price of goods and services?

The wear and tear on the highways which requires maintenance and occasional upgrades is proportional to the miles driven, which are proportional to the economic benefit derived from having a highway system, so that fuel taxes are a reasonable mechanism for distributing costs. Those who ship goods via trucks benefit from a better and more efficient highway system and can modulate their costs by more efficient use. Those who use the highways for personal transportation can do the same. It is efficient. And higher fuel taxes have a pigovian benefit in recovering some of the costs of pollution which would otherwise be externalized.

France has both high fuel taxes and tolls. And much better roads than we do as a result.

yrs,
rubato

A sensible analysis, Long Run; I pretty much agree with the whole post. But the principal advantage of keeping the current fuel tax system and indexing it to inflation--or even better, to the cost of fuel in particular rather than inflation in general--instead of changing to a different funding system as Jim proposes (even if that new system is, as he insists, a new dedicated funding source) is that the current system is already in place and functioning. Any new system would take years of political struggle and posturing followed by more years of bureaucratic planning, tweaking, adjustment and revision before we had it working smoothly. (And by that time the world will probably be completely out of petroleum and running on fumes...but that's a whole 'nother can of worms...)

If I had to come up with an additional tweak (besides indexing future increases to avoid future political battles) I would only hope for a simple and transparent way to translate fuel/fuel-tax increases into higher charges for transportation (trucking/shipping/courier/taxi/etc.) in a way that could be simply and transparently passed along into the prices of consumer goods and services without screwing the middleman (e.g.,. independent truckers, etc.) as has happened in the past.

Well, I'm gettin' it from all sides...

The intelligent Left, (Econo) the intelligent Right, (Long Run) and the hopelessly stupid, (I don't think I need to point out the handle for that one)...all seem to agree...

I'm nothing if not a political realist, and I understand quite well that the model I would like to put in place to replace the current funding structure for the interstate highway system is not politically feasible, in the current political environment...

But I stand by my conviction that it would be a much better, and more logical way to fund the highway system, no matter how many people I respect, (and of course those who I don't respect... ) disagree with me...


I've never had a big problem with being a minority of one; isn't the first time, won't be the last...