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Source: Getty
The United States cannot maintain its role as a superpower if it avoids public investment in infrastructure. The gas tax is a viable way to fund those investments.
Source: CNN
Come March 2012, politicians will once again enter into a political debate about funding American mobility. Without a fiscal safety net in place, the Highway Trust Fund will go broke.
America's transportation system is going broke. Revenue for the Highway Trust Fund is derived almost entirely from federal gas taxes and distributed to all 50 states. It covers nearly 80% of the capital costs of federally-funded transportation projects, with states carrying the remainder. From 2008 to 2010, Congress transferred $34.5 billion from general fund revenues to make up the funding shortfall. This stopgap measure was necessary to continue projects that are already in the works. Moreover, deferred maintenance—the failure to care for existing roads and bridges—combined with lost productivity are estimated to add more than $100 billion to the national deficit annually.
Over time, technology will help expand mobility options and improve system efficiency. This includes the ability to track real-time data and charge for system use and facilitate trip decision-making through virtual communications -- social networking, skype, real-time ride-sharing, and on-line meetings. These 21st-century interactions will bolster economic productivity and competitiveness. But they will take time to mature and, in the near-term, will not obviate the need for travel. Moreover, a dedicated source of revenues, such as gas taxes or other user-based fees, will remain critical to fund and facilitate the transition to technology-oriented transportation solutions.
The reverse is true when it comes to gas taxes. Investing in transportation facilitates reinvestment in America that is vital to economic growth. The U.S., once No. 1 in the world for its infrastructure, has fallen to 15th. China and India are cruising ahead with transportation infrastructure investments each at 9% of GDP compared to 2% in the U.S. This lackluster level of investment prevails despite well-documented needs—aging infrastructure, growing population, and shifting demographics. An upgraded, well-maintained, operationally-efficient transportation system, on the other hand, offers a significant competitive edge. Plus, the gas tax spreads the burden over hundreds of millions of system beneficiaries.
Beyond system efficiency gains, vehicles themselves are becoming more fuel-efficient and less wasteful. A proposal to double car- and SUV-fuel economy standards by 2025, while highly beneficial in terms of energy will translate into lower gas tax expenditures by higher-mpg cars. The rational way to deal with this is to increase gas taxes slightly over time to account for the fiscal impacts that cleaner, more efficient cars have on transportation infrastructure investments.
Domestic gas prices are largely influenced by world oil markets. With transportation accounting for about 70% of U.S. oil consumption and record oil-company profits reached when world oil prices go up, it's only fair that oil companies share the cost of providing transportation infrastructure. Structuring an oil fee assessed on producers and a variable gas tax paid by consumers can further stabilize the price at the pump. When oil prices go up, the retail gas tax can be abated. The oil security fee will make up for the revenue gap. When oil prices go down, the gas tax can be slowly reinstated. There isn't much that can be done about external events that affect global oil price volatility, but gas taxes can be designed to better manage abrupt price swings domestically.
In short, the transportation system is a critical component of America's economy. The United States cannot be a superpower if it starves public investment in infrastructure. Taxes tend to be more politically acceptable when people understand how funds provide benefits. And nobody understands better than travelers that the nation's infrastructure needs serious improvements. It's time to face the fact: The gas tax is a good way to invest in America.
Former Nonresident Associate, Energy and Climate Program
Shin-pei Tsay was a nonresident associate in the Energy and Climate Program at the Carnegie Endowment for International Peace.
Former Director and Senior Fellow, Energy and Climate Program
Gordon was director of Carnegie’s Energy and Climate Program, where her research focuses on oil and climate change issues in North America and globally.
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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