Commission Wants to Double Federal Gas Taxes

Published March 1, 2008

The federal government should more than double gasoline taxes in the next five years to subsidize light-rail systems and pay for highway improvements, a panel chaired by the U.S. Secretary of Transportation has decided.

Under such a plan, spending would rise by $225 billion to $340 billion per year, an amount larger than the 2007 national deficit.

In a January 15 announcement, the National Surface Transportation Policy and Revenue Study Commission also recommended the federal government should increase road tolls, set economic penalties for peak-hour driving, and hike taxes on freight transportation.

Free Lunch for Light Rail

“There is no free lunch,” Jack Schenendorf, vice chairman of the commission, told reporters at a January 15 news conference. “No way to accomplish what we are talking about without spending money, and therefore you have to raise money. There is no way to avoid that.”

The details of the new tax proposal contradicted Schenendorf’s “no free lunch” assertion. The commission envisions automobile drivers paying substantially higher gasoline taxes to subsidize light-rail transportation systems that relatively few people use.

“There is no shortage of funds for highways,” said Randal O’Toole, an urban growth and transportation expert at the Cato Institute. “The problem is that too great a share of federal highway user fees–40 percent–is already being diverted to transit and other non-highway activities. Even the money that is dedicated to highways is often earmarked for bridges to nowhere and other projects aimed more at satisfying the egos of members of Congress than at improving transportation.

“Over the past 15 years alone, America has spent well over $100 billion on rail transit construction projects,” O’Toole added. “What do we have for it? Transit has grown by 20 percent while urban driving has grown by 50 percent. Every single dollar spent on rail transit construction is a dollar wasted, which is why raising gas taxes is the wrong solution to our mobility crisis.”

Gas Taxes Being Wasted

Robert Poole, director of transportation studies at the Reason Foundation, agrees current tax revenues are being wasted.

“A large increase in the gas tax without fundamental reform in how and where the transportation money is spent would be a step in the wrong direction,” said Poole. “This country definitely needs to spend more on transportation infrastructure, but we should not be giving a spendthrift Congress billions more to fritter away on bridges to nowhere.

“We need to target investments toward relieving congestion in our major urban areas and expanding capacity for goods-movement on major interstate routes,” Poole continued.

Huge Tax Hike

Not only is the proposal costly, it may not even be feasible, said transportation expert C. Kenneth Orski, editor and publisher of Innovation Briefs.

“The commission’s estimates are predicated on the assumption that the federal government should continue funding 40 percent of the total national cost of surface transportation infrastructure,” Orski observed. “That would leave the other 60 percent of the cost to be funded by the states and localities.

“Many observers question whether state and local governments could collectively come up with their share of the funds–requiring an average [additional state gasoline tax] increase of 37.5 to 60 cents a gallon or its equivalent over the next five years,” Orski said. “Indeed, evidence points in the opposite direction.”

Orski explained, “Most states lack the political will to raise taxes for transportation– whether fuel, property, or sales taxes. Texas, Minnesota, Washington State, and Iowa are only the latest jurisdictions to have decided against tax increases to fund highway programs.”

The commission’s recommendations are not binding, but Congress is expected to reference them as the starting point for debate on a new transportation bill to take effect when the current one expires in 2009.

James M. Taylor ([email protected]) is a senior fellow of The Heartland Institute and managing editor of Environment & Climate News.