Is a federal fuel tax increase gaining traction?
Two bipartisan groups call for an increase, and a change in party control is shaking up the transportation scene in the nation’s capital.
Twenty-five cents or 15? Two bipartisan proposals floating in Washington, D.C., in the post-election days of November called for an increase in the gas tax. While both proposals call for a significant increase, the real question is not how much the increase will be, but whether an increase will survive? And with a major shift in the power structure in Congress, is there hope for timely passage of the federal transportation reauthorization that has already been delayed by 14 months?
The first call for an increase in the gas tax came from Senators Tom Carper (D-Delaware) and George Voinovich (R-Ohio). Voinvoich, retiring at the end of this Congress last week wrote to President Obama’s fiscal commission proposing a 25-cent-per-gallon fuel tax increase on gas and diesel, to be gradually rolled out over the next three years.
Fifteen cents would go directly to the Highway Trust Fund for infrastructure. Ten cents would go to paying down federal deficits.
The senators gave two reasons for their proposal.
“First, the Highway Trust Fund’s revenue stream is insufficient for current outlays,” the senators wrote. “Second, the existing level of transportation investment is inadequate to maintain our infrastructure and provide for 21st-century improvements.”
Money raised by the tax proposal would remain in a trust account until Congress passes a multi-year highway bill, the senators stated.
Since then, the president’s bipartisan National Commission on Fiscal Responsibility and Reform chaired by Erskine Bowles, a democrat and former Clinton White House chief of staff and former Senator Alan Simpson (R-Wyoming) countered with a call for a more modest gas tax increase – 15 cents. Their draft recommendations were based on the belief there should be an end to any more bailout highway funding from the general treasury. Highway maintenance cost taxpayers $34.5 billion in 2008 and 2009 over and above the money raised from the current gas tax.
The fuel tax increase is part of a larger proposal put forth by the bipartisan debt commission on how to bring the country’s deficits in line. In its parts, all are unpopular. Bowles and Simpson called the framework “a starting point” for discussions leading up to the commission’s vote on recommendations scheduled for early December.
Opposition to the draft recommendations, including the increase in the gas tax, is broad. The plan calls for cuts in domestic and military spending, limiting or eliminating popular tax breaks in return for lower rates, including the deductibility of mortgage interest payments, benefit cuts, increasing the retirement age for Social Security and more. The complete changes are geared to erasing nearly $4 trillion in projected federal deficits through 2020, as well as stabilizing the accumulated debt. The proposals would not take effect before 2012, a sufficient time according to Bowles and Simpson to not undermine the nation’s tepid economic recovery.
But with a host of newly elected anti-tax conservatives and a significant number of fiscally conservative Democrats ousted, it’s widely thought there’s a slim chance a supermajority of the commission could agree to a package of proposals by the commission’s projected December deadline.
Additionally Rep. John Mica, R-Fla., expected to chair the House Committee on Transportation and Infrastructure next year, has said he won’t entertain the idea of a fuel tax increase, or any tax increase for that matter, as a means of paying for infrastructure upgrades. Following the election, it was reported broadly that Mica plans to raise the billions needed to improve the highway system by streamlining transportation spending and leveraging public-private partnerships.
The two senators who shot the first round in the fuel tax volley, Carper and Voinovich, have argued taxpayers will have to pay for the transportation improvements either way, because Congress is expected to transfer billions of dollars from the general treasury to the trust fund to fix the nation’s crumbling roads and bridges. (The CBO estimates the highway trust fund will require $34 billion over the next six years.)
And without an agreement, Carper and Voinovich wrote, “this situation will force Congress to decide between two unacceptable solutions: additional transfers from the General Fund, which will lead to a higher deficit, or a sharp reduction in federal transportation funding for every state, which will create additional unemployment and continued deterioration of infrastructure,” the senators wrote.
A 25¢ tax increase, when fully implemented, would cost drivers on average of $156 a year, or $13 extra per month. Voinovich estimates the revenues that would go to transportation improvements would create 775,000 new jobs. Interestingly, that $156 is less than half the amount The Road Information Program estimates the average American pays every year in additional costs due to bad roads.
Congress last increased the gas tax in 1993 by 4.3 cents, under former President Clinton. Congress also increased the gas tax in 1990, under former President George H. W. Bush, raising it 5 cents per gallon. Since 1993, nothing.
The reluctance in Congress to raise the gas tax has meant that the federal Highway Trust Fund has fallen on hard times. It nearly went broke in 2008 and again in 2009, and has required General Fund transfers totaling $34.5 billion to keep it afloat.
“These transfers delayed immediate insolvency but did not fix the underlying problem,” Voinovich and Carper stated.
Whether a new U.S. Congress means progress can be made on the gas tax issue seems doubtful.
Many in the transportation industry are polishing off their crystal balls, trying to see what the new U.S. Congress will do for the nation’s deteriorating transportation infrastructure. Many are mourning the loss of Representative James Oberstar (D-Minnesota), a 36-year veteran legislator who has been the long-time head of the House Committee on Transportation and Infrastructure.
In parting interviews, Oberstar has expressed frustration with the inability of Congress to pass a transportation reauthorization – a failure he called a “big hole in the legislative agenda.” And he expressed concerns about the transportation learning curve, speculating that freshman legislators have “little appetite or appreciation for the broader policy questions the nation faces on transportation.” Also he expressed regret that U.S. lawmakers cannot have the same commitment to long-term planning and financing that leaders in Europe do.
Oberstar talked about how Europe’s higher gas prices – $3 to $4 more per gallon – are the reason Europeans enjoy modern transportation infrastructure – including high speed trains – and that the U.S. will suffer for its lack of long-term planning and investment. “We’re just sitting on the sidelines while they’re eating our lunch.”
For his part, transportation committee heir presumptive Mica has said his biggest priority will be reauthorization.
“We have to get a bill up early, because I have to get it through the Senate,” he told a reporter from the Morris News Service. He is unlikely to support an increase in the fuel tax, has voiced his support for private investment to fill the funding gap and has expressed the need to tap into existing federal transportation trust funds, as well.
He said, “when we have billions sitting in accounts, billions in harbor maintenance that is still sitting there, and unused stimulus money for transportation, I don’t think it’s needed.”