Category Archives: fuel tax

The Transportation Empowerment Act vs. Phasing in Devolution One EV at a Time

Reihan Salam at The Agenda discusses The Transportation Empowerment Act as a Model for Conservative Policymakers

In short the TEA would ” lower the federal gas tax while shifting virtually all responsibility for funding existing and new roads to state governments over five years”.

This is in contrast with current law, which would keep the federal gas tax the same (and thus decreasing in buying power), or proposals to raise the gas tax to maintain buying power in the face of declining fuel sales due both to fuel economy and declining vehicle travel. This problem will worsen with fleet electrification.

The vast majority of travel is within the same county, and thus certainly the same state (See The Hierarchy of Roads, the Locality of Traffic, and Governance for data from GPS from Minnesota), especially for big states in the western half of the US. Thus the problem is largely a state not national problem. Where there is a large share of interstate travel, states are fond of tolls (as in the northeast corridor) [See my dissertation: On Whom the Toll Falls for theory and Why States Toll for empirical evidence].

I am very empathetic with the idea of Subsidiarity, that we should deal with problems at the lowest reasonable scale of government.  This mismatch (or correspondence problem) of jurisdictional authority and the locale of the problem leads to many inefficiencies. Just as the federal government should not fix potholes on my local street, and my homeowners association should not have a nuclear policy, roads should be dealt with, and funded, closest to the user without incurring excess costs due to losing economies of scale. States should (and in many case did) raise their gas taxes, and further share that revenue with local levels of government (replacing local property taxes and other sources of general revenue), to fix today’s potholes and weak bridges. (Or perhaps there would only be one level of government operating and maintaining all levels of roads in states, which might be more efficient – it is what many other utilities do).

However, I am also empathetic with the idea that there is an existing source of revenue (the existing level of federal gas tax) on which there is consensus, which should not be thrown away so that 50 more difficult political fights can be had to achieve the same level of revenue. Most of the federal gas tax is returned to the states in proportion to the amount that was generated in those states, and while there are federal government rules and regulations and stipulations that add to the cost of doing business, most of those rules and regulations are well-intentioned.

The conclusion I have come to is we should keep the federal gas tax at the level it is at, dedicate it to specific national purposes (Maintaining and Rehabilitating the National Highway System – i.e. Fix-it-First) and allow it to fade away in importance over time. While of course it is technically possible to make this change in five years, I think it needlessly accelerates the process. (I am also aware of the Overton Window, and staking out a more extreme position helps move the dialog in that direction.)

There will be inevitable change in highway funding with electrification, and little would be lost waiting until EVs and HEVs are, say, 25% or 50% of the fleet, and the country is ready for some form of state-based mileage fee in lieu of gas taxes, administered with an emergent national standard so there don’t have to be 20 transponders in each car or 50 vignette stickers on your door.

In the end not all problems are federal problems and not all solutions are federal solutions. But there are real problems, and immediately lowering the federal gas tax exacerbates the short run problem in transportation. I am not convinced that this cold turkey strategy of phasing out gas taxes in 5 years (or at at least luke-warm turkey) outweighs the negative effects of federal funding, such as building a more capital intensive system than states themselves could justify if they bore all the costs, and raising costs all around.

See also: Fix It First  and Enterprising Roads

Just say ‘no’ to a gas tax increase | Milwaukee Journal Sentinel

David Riemer in the The Milwaukee Journal Sentinal opines  “Just say ‘no’ to a gas tax increase

It takes only a few minutes of driving on Wisconsin streets in winter (or even in summer) to reach the same conclusion about local roads and bridges that national experts Matthew Kahn (University of California, Los Angeles) and David Levinson (University of Minnesota) reached in 2011 about the dismal condition of the country’s state highways: “The roads and bridges that make up our nation’s highway infrastructure are in disrepair as a result of insufficient maintenance — a maintenance deficit that increases travel times, damages vehicles and can lead to accidents that cause injuries or even fatalities.”

He further correctly diagnoses the problem:

As we drivers make our way through city streets, along local roads and down big highways, we still use up a huge volume of gas. When we refuel at the pump, our gas purchases give government — the state Department of Transportation and the federal DOT — hundreds of millions of tax dollars. License fees add additional large sums to government’s coffers.

The problem is that our state DOT, the Wisconsin Legislature and Wisconsin governors have refused to return to local government a large share of the tax revenue that is generated by driving on local streets in the first place.

Cities, villages, towns and counties cannot fix local roads with dollars that the state DOT refuses to send them. Nor can local governments afford to underfund public safety (police, fire, etc.) or other vital local services in order to literally fill in the potholes. Nor do local taxpayers and governments want — and state law makes it tough for them anyway — to raise property taxes to fill in the potholes.

So the potholes go unfilled, or get patched too late or imperfectly, year after year after year.

Where, then, do the gas tax dollars that local drivers pay end up instead? The sad answer is that, regardless of which party controls power in Madison, the state DOT sucks up most of the huge sum of gas tax revenue already collected from local drivers, and siphons it off to DOT’s wasteful pet projects.

Rather than fix local roads with tax revenues generated by local driving, DOT diverts hundreds of millions of gas tax dollars to pay to widen interstate highways that already are wide enough. And DOT diverts hundreds of millions more to finance new roads that are simply not needed.

My co-author Matt Kahn comments “David Levinson and I have had a good run with our Hamilton Project paper.”

Cars Are Getting Greener. Here’s A High Tech Alternative To The Gas Tax. | ThinkProgress

ThinkProgress has an article about road pricing: Cars Are Getting Greener. Here’s A High Tech Alternative To The Gas Tax.. They quote me about Minnesota’s Gas Tax and I-35W:

“Like the rest of the country, Minnesota’s gas tax barely made a dent in the costs to repair the state’s abysmal infrastructure. Attempts to raise the state tax repeatedly failed in the legislature, in large part because the state’s Governor at the time, Tim Pawlenty (R-MN), had pledged to veto any tax increases whatsoever. That extra revenue might have generated more money to inspect and repair the I-35 bridge and others in similar condition. But since the Minnesota gas tax had not been raised since 1988, David Levinson of the University of Minnesota noted, ‘its purchasing power had diminished significantly, while the network was expanded and aged, and traffic levels increased.’

‘There [were] actually several proposals that year to do some repairs on that bridge,’ Natale said. But the legislature ‘defeated that. They just didn’t allow it to happen. The end result is, how much money did we spend replacing the bridge, and how many people were killed?’

The I-35 catastrophe rattled lawmakers’ attitudes. Sen. Amy Klobuchar (D-MN) called the bridge disaster a ‘wake-up call’ to raise the alarm over infrastructure deficits all over the country.

Even Pawlenty wavered. ‘After the bridge collapsed, he initially said that we need to do something about the funding for inspections and repairs,’ Natale said. ‘That was what he said day 1. On day 4, he said, well we can fund this if we can find other things not to do.’”

The US needs better roads and bridges–and less congestion–but not a higher federal gasoline tax |AEIdeas

James Pethokoukis discusses (and endorses) Fix-it-First, Expand-it-Second, Reward-it-Third

Now the case for upgrading American transportation infrastructure isn’t about short-term Keynesian stimulus. It’s about long-term growth. “Places that have the greatest  accessibility, that enable more people to interact in less time, produce the greatest wealth,” write transportation experts Matthew Kahn and David Levinson in a 2011 report. More accessibility also means more economic mobility. A 2013 analysis from the Equality of Opportunity Project found climbing the ladder much harder in cities with longer commute times. Indeed, the monetized cost of US congestion is around $120 billion a year.

From the “The price of gas is high, let’s make it higher” deparment

An example of a recent line of reasoning … Bring On The $6 Gallon Of Gas / It would revolutionize America. It would make us all better humans. But could you handle it?
Another example from Andrew Sullivan
Or this from Thomas Friedman

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