Updated April 12, 2013, 11:48 a.m. ET
The federal gasoline tax is broken.
Our highways and bridges are in desperate need of improvement and repair and revenue collected from the 18.4 cent per-gallon tax—the main source of funding for roadways—is falling far short of what we need to fix our crumbling infrastructure.
There is broad agreement that something needs to be done. The disagreement is over what.
Some experts say the quickest and easiest thing to do is to simply index the 18.4-cent gasoline tax—which hasn’t changed since 1993—to inflation. We will need to find another source of roadway funding eventually, they say, but if we don’t do something now our transportation problems are only going to get worse.
Others believe the gasoline tax is obsolete and needs to be replaced with an alternative source of funding. Not only is the tax unpopular, they say, it is a declining revenue source because fuel-efficiency gains have reduced drivers’ fuel purchases.
They believe that a tax on miles driven is a far better and fairer way to fund our transportation needs, and say the U.S. could begin such a transition today.
Carl Davis, a senior policy analyst at the Institute on Taxation and Economic Policy, argues in favor raising the gas tax. Robert Poole, director of transportation policy at the Reason Foundation, makes the case for fees tied to miles driven instead.
Yes: We Need a Quick Fix For Crumbling Roads and Bridges
By Carl Davis
On Aug. 10, when the summer road-trip season is in full swing, exactly 20 years will have gone by since the last increase in the federal gasoline tax was signed into law.
Despite decades of neglect, the gasoline tax remains the single most important source of transportation funding in this country, and for good reason: With the tax, people who drive the most or own the heaviest and least fuel-efficient vehicles tend to pay more during their frequent stops at the gas station.
Unfortunately, revenue is increasingly falling short of our transportation needs, leading some lawmakers to conclude that gasoline taxes are obsolete and should be abandoned. The reality, however, is that the federal gasoline tax could very easily be made a viable source of revenue for decades to come.
Inflation is the issue. While the cost of highway construction and repair has increased 55% over the past 20 years, the federal gas tax hasn’t budged from 18.4 cents per gallon. That means drivers today are chipping in the same $3 in federal taxes per tank of gas that they paid in 1993, even as the construction projects being funded with that $3 have become much more expensive.
Inflation isn’t a complicated problem, and it already has been addressed in many areas of the tax code. When Congress allowed the Bush-era income-tax cuts to expire on incomes over $400,000, for example, all sides agreed that the $400,000 cutoff should grow each year alongside inflation.
This same basic fix, coupled with an immediate gasoline-tax increase to catch up with the past 20 years of inflation, would put transportation revenue on a much more sustainable path.
Opponents of the gasoline tax often argue that fuel-efficiency gains have reduced drivers’ fuel purchases, so the tax can’t be relied upon. But over the same period that construction costs increased 55%, vehicle fuel efficiency went up less than 5%.
More ambitious fuel-economy standards for new cars will no doubt accelerate this growth in the years ahead, but the gas tax can easily be adjusted to deal with this trend. That, in turn, will provide an incentive for drivers to buy more fuel-efficient cars, creating a race to the top that will benefit both the environment and our energy independence.
We Can’t Wait
By contrast, replacing the gasoline tax with a tax on the number of miles driven would reduce the incentive to drive more efficient cars. A “vehicle miles traveled,” or VMT, tax also can’t possibly be implemented quickly enough to address the funding challenges we face today. A national commission that studied the VMT tax concluded that privacy and administrative hurdles would take at least 10 years to overcome, and concluded that an immediate gasoline tax increase is needed to fix our congested and crumbling infrastructure.
The idea that we could implement a VMT tax more quickly by combining existing electronic-tolling equipment with annual odometer readings isn’t realistic. Nothing even approaching a comprehensive tolling system exists, and mandated odometer readings would be a poor way to measure miles traveled since odometers can be temporarily disabled or rolled back.
If our public officials make clear that transportation funds aren’t being funneled toward projects that don’t benefit drivers, and explain how better infrastructure would improve drivers’ lives—fewer trips to the mechanic, less gas wasted in traffic congestion and shorter commutes home—they could win over many who oppose a tax increase.
The day will eventually come when we need to find new funding sources for roads. But we can’t let that distract us from the funding shortfall that the gasoline tax can best address today.
Mr. Davis is a senior policy analyst at the Institute on Taxation and Economic Policy. He can be reached at [email protected].