The Highway Trust Fund (HTF) is on life-support, again. It runs-out of money in May.
HTF funding pays for America’s roads, bridges, and mass-transit infrastructure. The American Society of Civil Engineers has given U.S. infrastructure a D+ grade. Improving U.S. transportation infrastructure should be a national priority.
In July, Congress passed a $10.8 billion bill extending funding to pay the federal government’s share of road and bridge repairs for 10 months. This stop-gap legislation put off a long-term funding solution.
The HTF is funded by the federal gas tax. The rate of 18.4 cents per gallon was last raised in 1993, but does not adjust for inflation. In addition, fewer gallons are sold because vehicles get better mileage and miles driven are declining. This all adds up to insufficient revenue.
The U.S. spends $53 billion annually on transportation projects, but the gas tax only brings in $35 billion. To make up the difference in recent years, Congress has relied on borrowing money from general revenue accounts which adds to our huge national debt.
The bulk of the money for the current 10-month band-aid comes from a budget gimmick known as pension smoothing, which authorizes companies to temporarily reduce pension contributions and pay more taxes…hmmm. This ill-conceived legislation potentially adds to the problems of the federal Pension Benefits Guaranty Corporation – another underfunded program.
These sleight-of-hand funding approaches are the most inefficient and least transparent way to manage our infrastructure investments.
There has been bipartisan talk, among some reasonable members of Congress, about phasing-in an increase of the federal gas tax by 15 cents per gallon over three years. This would mostly makeup the annual short-fall lost to inflation since the 1993 legislation.
This proposal has gained the support of the U.S. Chamber of Commerce, labor, the trucking industry, manufacturers, and safety groups. Environmentalists should like it too, as it incentivizes fuel efficiency when carbon is taxed like this.
Phased-in over 36 months, it’s less than half a penny per gallon per month, and would not be noticeable to consumers. After three years, it adds up to an extra $3 for a 20-gallon tank.
Those who drive more than others will pay more. However, the gas tax is essentially a user fee for the wear and tear on our roads and bridges. Those paying the most, use and benefit more. Given recent declines in gas prices – this is the best time to do it.
This legislation would create a stable method of funding so projects can be planned in advance, and completed in a more cost effective manner. The bill should also include provisions for annual adjustments for inflation, making the funding sustainable and preventing future legislative fights. Such a law would provide certainty to: States, counties, cities, businesses, and those who depend on transportation systems.
There are several other significant benefits to this legislation: First, improved safety. Another substantial dividend is the creation of hundreds-of-thousands of jobs. Economic analysis estimates that long-term increases in infrastructure investments would increase employment by almost 1.3 million in 15 years; and help the economy and grow additional GDP 1.3% by 2020 and 2.9% by 2030. Creating that many jobs generates lots of payroll taxes and saves tax-spending on social costs. Other benefits include: Better mass-transit, strengthened global competitiveness, and increased exports.
Altogether, these positive impacts will help create and sustain an upward virtuous cycle of economic growth. Sound transportation infrastructure is not only essential to a thriving economy, it’s a catalyst.
We’ll also want this bill to contain assurances of accountability and transparency; and ensure that the money is spent wisely on essential projects – not on wasteful pork-barrel spending.
Increasing the gas tax shouldn’t be political heresy. Let’s be honest, we’re spending the money already. Congress has been playing a funding shell-game so they can claim to not be raising taxes. I don’t like raising taxes either, but I dislike spending my grandkids’ tax-dollars even more. The current trickery permitting pension-fund smoothing is irresponsible and non-transparent. It’s these kinds of shenanigans that disillusion voters.
Too many members of Congress act timidly when it comes to raising any tax. Many have signed shortsighted pledges to never do so. They should be reminded that both Presidents George H.W. Bush and Ronald Reagan signed gas tax increases.
We need some courageous leaders in Congress to spearhead this effort early this session. If some brave members emerge to do so, and they are willing to patiently and repeatedly explain the benefits to constituents, I believe reasonable voters will get on-board.