Death to the Federal Gas Tax

The
notion that U.S. infrastructure is crumbling and underfunded has
been common lately, and more such news came in February, when the
Department of Transportation (DOT)
announced that the Federal Highway Trust Fund could soon
run out. This spurred debate about what to do with the trust’s main
funding source, the federal gas tax. Some legislators have long
wanted to raise this tax, and President Obama
recently proposed his
own $302 billion funding plan. But one Congressman, Georgia
Republican Tom Graves, has a better idea: nearly abolish the gas
tax altogether.

Last November, Graves introduced the Transportation Empowerment
Act, which was cosponsored through Senate legislation by
Republican Mike Lee. By drastically reducing the tax, it would
enable states to manage their own transportation policies,
improving a process that has become massively inefficient under
federal oversight.

“It’s rather silly,” Graves told the
Atlanta Journal-Constitution, that “taxpayers pay taxes at
the pump that go to the federal government, [which] then tells our
state how it must spend the money,” even though it doesn’t “give
you all the money you submitted.”

Currently, the $18.4 cents/gallon tax, along with an even higher
diesel fuel tax, is the nation’s prime source for transportation
spending. Starting in 1956, the tax was funneled to the Highway
Trust Fund to pay for the Interstate System, and has since funded
numerous other projects. But with the rise of fuel-efficient
automobiles, revenue from it has declined over the years from a
high of $45 billion to somewhat more than $30 billion annually, and
the fund is expected to have
insufficient resources to meet all of its obligations within a
year. Graves’ bill would reduce the tax over five years to 3.7
cents/gallon, which could produce around $7 billion, and that money
would be sent to states through block grants with few regulatory
strings attached. States could then make up the difference by
raising their own gas taxes.

Graves believes that this would produce more and better
infrastructure, by allowing states to keep revenue that he
correctly claims is not now being returned. According to a
2011 Heritage
Foundation study, 28 states have a negative return on the
gas taxes that they pay into the fund. Georgia, for example, is
expected to have an 84 percent return in 2014—meaning a $185
million overall loss. Similar nine-figure losses are typical
for Colorado, Michigan,
and Texas, which has been robbed of one-fifth of its revenue since
1956.

How do such enormous sums get frittered away? Partly because of
redistribution to other states. But it is also because of added
costs imposed by what Graves calls the “Washington middleman.”

This includes the money needed to pay for federal bureaucracy,
including a Federal Highway Administration that largely duplicates
the responsibilities of state DOTs. States also suffer the added
costs of numerous federal regulations, many of which cater
more to left-wing policy goals than actual transportation needs.
Every federally-funded transportation project, for example, is
subject to Davis-Bacon laws that mandate the payment of local
prevailing wages. An executive order from
President Obama in 2009 requires federal projects of over
$25 million to use Project Labor Agreements, which discourage open
bidding in favor of unionized collective bargaining. And “Buy America”
provisions in the U.S. Code prevent purchases of certain foreign
construction materials, even if they’re cheaper. Other regulations
require redundant environmental reviews and over-demanding
construction standards. Former FHWA head Robert Farris
has estimated that,
altogether, federal regulations increase project costs by 30
percent.

Federal oversight also encourages construction of projects that
make little economic sense. Before the ban in 2010, large chunks of
gas tax revenue went for earmarks. This meant that, rather than
receiving public input, projects were funded through amendments
that were put into spending bills by politically-driven
legislators. This led to numerous wasteful projects, from Alaska’s
“Bridge to Nowhere,” to over-elaborate bus stops and transportation
museums. Although Republicans have extended the earmark ban,
there’s no guarantee that it will be safe if Democrats reoccupy the
House.

The selection process has also been inspired by urban planning
dogmas that have crept from America’s ivory towers into federal
policy. In 1983, the Highway Fund was expanded for mass transit,
and 16
percent of revenue is now dedicated to this purpose. Along
with light rail, buses, and streetcars, the money goes to bike
lanes, walking trails, pedestrian malls, landscaping, and other
aesthetic garnish. Such transportation “alternatives” have become
another way for the federal government to promote
Smart Growth, but in most places, they don’t move people
cost-effectively.

Graves believes that by increasing local autonomy, his bill will
weed out many of these misallocations. This is inspired by his
belief—rooted in American federalism—that infrastructure becomes
most pragmatic when funded by those who actually use it. This is in
contrast, writes Nicole
Gelinas in City Journal, to the impression of “free
money” that localities get when receiving federal grants from
taxpayers nationwide. Local control would also discourage the odd
transportation policy uniformity now being imposed in a nation with
vast cultural differences, from bike- and rail-obsessed Portland to
Graves’ rural Georgia district.

Of course the problem with his Transportation Empowerment Act
may be its unlikelihood of passing. Due to political pressure, the
gas tax has not been raised since 1993, causing it to lag behind
inflation, but it has still been preserved because of its
bipartisan appeal. Republicans like it because, by taxing
consumption, it broadens the revenue base, and serves as a road
fee. Democrats like it because it taxes a product considered
environmentally harmful. This is why debates have been less about
repealing it, than about how it can be bolstered.

But whatever is decided on should, at very least, echo Graves’
focus on local empowerment. Ever since the inception of the gas
tax, the federal government’s role in transportation has, like with
other policies, greatly expanded, even as its administrative
competency has declined. As a result, transportation policy today
is less about improving mobility than about politics, aesthetics,
and broad social goals. This unfortunate trend has contributed to
the poor state of U.S. infrastructure so apparent today.