Why Aren't Gas Taxes Taking Care Of Our Crumbling Transportation System

For decades, each of our state and federal governments have been collecting gasoline taxes to help build new roads and bridges; and, at the same time, repair or replace those that are in disrepair. Yet, we continue to hear -- in so many recent Obama tax-the-rich speeches -- that we have hundreds of roads and bridges that are simply crumbling due to neglect. So, what gives?

Obama is right. The problem is neglect. But, the neglect has been caused by one Congress after another (and by some state legislatures too) by not putting into place a fuel tax that increments itself each year so that increased costs for road/bridge construction/repair are gradually addressed over time. Instead, every time the gasoline tax needs to be raised, it has always to be done on a one-off basis and at a time when funds have fallen to a critical level; resulting in the possibility of "sticker shock" at the local gas pumps.

The last time the federal gasoline tax was raised was in 1993 when it was set at 18.4 cents per gallon of gasoline (24.4 cents for diesel). Since that time, all the costs associated with building and maintaining this nation's transportation system have logically gone up. Many studies have been conducted over the years to determine what the tax should be today, and by most accounts, that 18.4 cent tax should have been raised to at least 40 cents per gallon by now. All too often, for political reasons, the gasoline tax increases are ignored because raising it would cause that "sticker shock" I mentioned and because it would disproportionately hurt the working poor. So, as a consequence, our complete transportation infrastructure suffers while our lawmakers avoid telling the truth to the country.

But, the funding problems don't stop there. Another problem with the federal fuel tax is that our U.S. Treasury prefers to directly collect those taxes and, then, distribute the funds as federal projects. This way, all these federally-funded projects fall into the federal work rules for road and bridge construction. Once such rule, the one that comes from the recession-era 1931 Davis-Bacon Act, requires that all workers on federal projects be paid the prevailing wage; or, in other words, a union wage. Because of this, all too often, road and bridge work is done at the highest possible cost for labor; thereby reducing the overall funds available and, subsequently, the amount of work that can be done. Additionally, like all money being collected by the federal government, 40% of federal tax money must be diverted to payoff the recurring national debt. The states would be better off collecting the taxes themselves and directing the work as state-run projects; avoiding federal work rules. Then, when needed, forward a percentage of those taxes to the federal government to fund any fed-only kinds of work.

It seems that, whenever you dig into some kind of problem facing our country, political fingerprints are all over it. Mr. Obama would be better off revising how we collect and use the fuel tax and at what amount; rather than using the disrepair of our infrastructure as a means of class warfare for his reelection campaign.

Instead of making infrastructure projects a one-time thing as part of a reelection plan through a mini-stimulus package, let's make them a permanent activity so that the jobs are more permanent. Let's raise the gasoline tax over time so its less painful to society; but, at an accelerated rate in order to play catchup. Let's put in place a cost adjustment system so that the tax is appropriately raised each year. Lastly, repeal the Davis-Bacon Act so that any federal transportation project can be done a best-bid price basis.

The Tax Man Cometh

While Mr. Obama campaigned on cutting middle class taxes, the reality of our economy just won't let that happen. Already, Congress is talking about raising Federal gasoline tax from the current 18 cents a gallon to 40 cents. Not a big number, but it will effect the bottom lines of people who have to drive a lot for their jobs. Also, it will be reflected in the cost of almost everything we buy because trucking and shipping costs will be affected and increased across the board. Granted, we are better off than we were when oil was at $147 a barrel but, given the tough economic times, every dollar of savings may help save jobs.

I would expect that Congress and our new President will raise taxes across the board. We already had a deficit and all this "bailout money" is just making that hole in the governments wallet a whole lot bigger. The only way to close that hole is to reduce spending and/or to raise taxes. For those guys in Congress (and the White House), it has always been much easier to raise taxes than make the hard decision to cut spending.

The biggest taxes to come will be on the state and local level. At least 40 states are now projected to be in deficit trouble next year. We've already heard from California with Arnold's request for a few billion dollars in a Federal loan. However, the biggest states are all in trouble like New York, Illinois, Pennsylvania, and New Jersey. This is where the wrath of the tax man will be seen the most. States that have income taxes will all probably raise them. States that don't have income taxes will probably look at starting them. Sales taxes will go up because, in a recession, tax revenues on sales will be falling. Expect real estate and "sin" taxes on tobacco and liquor sales to increase. I would also bet that many heavily traveled roads will start "toll collections" to help pay for repair and other infrastructure rebuilding.

The problem with all these taxes is that they will ultimately be inflationary at a time when our economy can least afford higher prices. In many ways, the recovery of the economy could be stalled by a lot of new taxation. By the way, don't expect any of those new taxes to be rolled back when the economy gets better.

Europe and Japan's Leg-Up on Gasoline Consumption

While, in this country, we constantly flap our jaws about being "green" and talk about renewable energy resources and the conservation of gasoline, Europe and Japan have, for years, been involved with "mass transit" systems that are more environmentally responsible.

We are truly "pigs" when it comes to ground travel and air travel. We are a country of one-person-per-car and we prefer cars over public transportation. What's worse, our preferred means of regional transportation (movement between major cities like Los Angeles and San Francisco or Detroit and Chicago) is usually by automobile and by gas-guzzling short-range jets and not by train. Further, we move most of our freight by truck when short-haul freight trains would be more efficient.

When we hear our politicians talking about saving the planet or reducing our dependence on foreign oil, no one talks about mass transportation as a means, available right now, of reducing emissions and oil/gasoline consumption. They would prefer to talk about "pie-in-the-sky" things like hydrogen fuel cells that may be a two decades or more away from full implementation.

The trick to getting America off its love of the automobile is to make public transportation extremely affordable and more convenient. First, we need to subsidize mass transit so its cost is attractive. Second, we need to be smart about where we apply mass transit. There are natural "high volume" routes that could easily get cars off the road. (I live in Las Vegas and there are thousands of cars that almost commute daily/weekly from Los Angeles to Las Vegas; and vice versa) Third, it should be fast; certainly faster than by car or airplane. This means the application of high-speed "bullet-type trains" and the use of limited-stop express trains that ride separate spurs. Fourth, there needs to be convenient end-point modes of "fan-out" transportation such as compact rental cars, buses, and short-haul commuter trains.

The Federal government needs to take the lead. The reason we have so little regional transportation in this country is because too many government agencies are involved. In order to make something happen, local and state authorities have to work with other local and state authorities; and, mass transportation isn't their priority. But, as a nation, it should be!

Image by AndreasNygaard on Flickr with Creative Commons Licensing.