(Bloomberg Businessweek) -- President Trump’s plan to spend at least $200 billion to spur investment in U.S. public works has set off a bitter battle over raising the federal gas tax—and highlighted fundamental problems with the way the U.S. pays for roads and bridges.
On Feb. 12, Trump released his infrastructure plan, which would use federal dollars mostly as incentives to encourage states, localities, and the private sector to spend at least $1.5 trillion on infrastructure improvements. In a meeting with lawmakers two days later, he supported the idea of raising the gas tax to help fund his proposal.
The current federal taxes—18.4¢ a gallon on gasoline and 24.4¢ a gallon on diesel—flow to the Highway Trust Fund, which supports road, bridge, and mass transit projects. But revenue from the gas tax, plus sales taxes and fees on heavy trucks and other road-related sources, has lagged outlays since 2008. The shortfall in recent years has forced Congress to transfer money from other sources to cover the gap. Receipts into the fund’s highway account were about $35 billion in 2016 without transfers, compared with outlays of about $45 billion, according to the White House Council of Economic Advisers. Without additional revenue, the trust fund will become insolvent by 2021, according to the Congressional Budget Office.
The U.S. Chamber of Commerce says raising the gas tax, which hasn’t increased in 25 years, is the simplest and fairest way to generate money for roads and bridges. But key Republicans, including John Barrasso of Wyoming, chairman of the Senate Committee on Environment and Public Works, are opposed. And so are billionaires Charles and David Koch, whose fortune comes from oil and who spend heavily to influence government policy. Opponents say the tax is regressive, putting a bigger burden on lower- and middle-income families. They object to the fact that some of the money collected for the Highway Trust Fund goes into mass transit systems and not just roads and bridges. And raising any taxes is simply off-limits for many Republican lawmakers. Marc Short, Trump’s director of legislative affairs, says the political reality is that “there is not support for a gas tax in Congress.”
Still, that doesn’t mean the idea is dead. “If there’s a debate on these funding opportunities, including increasing the gas tax, it will be because the White House decides that they want an infrastructure bill and have some pretty big dollars out there to pay for it,” says Ray LaHood, a Republican who served as transportation secretary under President Obama.
Even if the president persuades lawmakers to act, a higher gas tax is only a stopgap. Greater fuel efficiency and higher numbers of electric cars mean an alternative to the gas tax is needed. According to the American Society of Civil Engineers’ 2017 report card, the U.S. has underfunded its highway system for years, resulting in $836 billion worth of work on bridges and highways that needs to be done. On Feb. 21, the annual report released by Trump’s own Council of Economic Advisers said the gas-based financing regimen “is becoming increasingly unsustainable.” The next day, Kevin Hassett, chairman of the council, attended a White House briefing on the report. “If we’re all driving around in Teslas, then how is the gas tax going to pay to fix the potholes?” he asked.
When it comes to funding, “we are at a tipping point,” says Rick Geddes, director of Cornell’s program in infrastructure policy. Technology is changing how the transportation system is used, Geddes adds, and the way we pay for it has to change as well.
Some states are already trying other ways to raise road revenue. Oregon is running a pilot program that charges drivers fees based on miles traveled rather than a tax on gallons of gas burned. The main appeal of the mileage fee, according to Adrian Moore, vice president for education at the nonprofit Mileage-Based User Fee Alliance, is that it applies equally to all vehicles based on how much they use the road system, regardless of the type of vehicle and how much fuel it uses. Oregon’s first program began with 88 resident volunteers in 2012. It now has about 1,400 volunteers, according to the state Department of Transportation. Drivers plug a device that records miles into car data ports. The fee is 1.7¢ per mile, with credits for state fuel taxes paid. California and five other states are testing similar programs; a national system is years away.
The U.S. Chamber of Commerce says raising the gas tax by 25¢ a gallon would generate $394 billion over a decade and cost the average American about $9 a month. Chamber Chief Executive Officer Thomas Donohue doesn’t believe raising the tax would be political suicide. Thirty-nine states have raised their local gas taxes since 1993—some more than once—and he’s pledged to give $100 to anyone who can find a politician who lost solely because of an increase. “Our leaders need to stop hiding behind the fallacy that this can’t be done, and just go do it,” Donohue says.
Indeed, surveys show that drivers support paying more if the money is spent on roads and bridges. Fifty-five percent of Americans in a Bloomberg National Poll in July said they would back an increase. The concept had bipartisan support. The U.S. Chamber plans to mobilize members and local affiliates to advocate an increase and to push opponents for an alternative, says Neil Bradley, its chief policy officer. “Some folks may not like the idea of increasing the motor fuel user fee, but if you don’t like that, what’s your proposal?” he asks. “What shouldn’t be acceptable, and what we don’t think is acceptable, is to simply say, ‘Well, we don’t have a solution.’ ”
To contact the author of this story: Mark Niquette in Columbus at mniquette@bloomberg.net.
To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net, Dimitra Kessenides
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