Gas Tax Hikes Or Pay-Per-Mile: How Should The U.S. Fund Roads?

February 18, 2013

After 20 years, we may finally be getting a raise -- and by "raise", we mean "an increase on the federal gas tax". A growing number of voices suggest that, though not perfect, an increase on the tax that motorists pay for gasoline is the best way to bring America's infrastructure up to snuff and keep the U.S. fatality rate hovering near record lows.


Here's what we know about the state of our infrastructure:

  • U.S. roads are in terrible shape. In fact, one-third of them have been deemed "substandard" and one-fourth of all bridges are in need of repair.
  • The sad state of that infrastructure may be causing the expected uptick in highway fatalities glimpsed in preliminary 2012 statistics
  • Even when you take fatalities out of the equation, there are plenty of accidents to consider, injuring drivers and passengers and putting the brakes on U.S. productivity.

The federal gas tax was intended to prevent these problems by funding roadway repairs and expansion. However:

  • The federal gas tax has been stuck at 18.4 cents per gallon since 1993.
  • Its long-term viability as a source of revenue seems dodgy, considering that cars are becoming more fuel efficient -- which is, ironically, a direct result of federal fuel-efficiency standards. We could blame federal agencies for failing to foresee this problem, but in fairness, Congress' unwillingness to raise the gas tax for 20 years hasn't helped either.

Speaking out

Over the past week, Congress has heard from a number of people hoping to bring the gas tax into the 21st century. Speaking before a House committee on transportation, the president of the U.S. Chamber of Commerce announced the Chamber's support for "reasonable increases in gas taxes that are phased in and indexed to inflation". 

Former Pennsylvania Governor Ed Rendell testified before that committee, too, saying that the federal gas tax had to be raised -- at least for the short term -- to keep highways up to snuff. He also encouraged Congress to eliminate federal restrictions on states' ability to build toll roads.

According to Rendell, the consequences of failing to act are dire: "Infrastructure is an economic driver and has the added benefit of creating long-term quality jobs. It improves our lives and enhances our economic competitiveness. To put off these investments -- or worse, to devolve all responsibility to the states -- is simply shortsighted."

How much moolah is needed? According to the American Society of Civil Engineers, the U.S. should spend about $2.75 trillion on infrastructure by 2020 in order to maintain and improve it. Unfortunately, funds generated from the federal gas tax peaked in 2007 at $40 billion per year. (They now hover closer to $36 billion.) Combined with state and local tax revenues, projected expenditures on infrastructure only reach $1.66 trillion between now and 2020. That's a $1.09 trillion shortfall.

Worse: if improvements to the infrastructure aren't made, the American Society of Civil Engineers says that the U.S. stands to lose about 3.5 million jobs by the year 2020 and $3.1 trillion in economic output.

Other possibilities

Clearly, the gas tax isn't a long-term solution. As the fuel efficiency of our cars increases, we use less gasoline, meaning less revenue from gas taxes. That trend isn't likely to change.

The only other serious solution that's been proposed has been taxing drivers on the distance they travel. However, that's not gone over well with many motorists, who see such programs -- or more specifically, they transponders they'd require -- as an invasion of personal privacy. 

Some suggest cutting other areas of the federal budget and earmarking those savings for transportation, but some of the biggest programs in the nation's budget are Defense, Medicare, and Social Security -- all of which Congress is reluctant to touch. Cutting smaller programs may look good on paper, but it can't generate the $1.09 trillion needed to address the projected shortfall.

If you've got any great ideas on how to address America's infrastructure problem, share them in the comments below.

[h/t John Voelcker]


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