Pete Buttigieg, President Biden’s likely incoming transportation secretary, admitted in his Jan. 21 Senate confirmation hearings that raising the federal excise tax on gasoline was one option under consideration to pay for the administration’s proposed infrastructure projects.
Buttigieg’s aides quickly walked that statement back, saying that although a “variety of options” were being batted around, “increasing the gas tax is not among them.”
If Buttigieg and the Biden administration hold to that commitment, it will make funding their infrastructure plans harder.
“Much of the interstate system is nearing the end of its functional life and will need to be completely rebuilt over the next two decades. Cost estimates for this undertaking are above $1 trillion,” Marc Scribner, a transportation policy analyst for the Reason Foundation, told the Washington Examiner.
Scribner said he believes the fuel tax hike reversal was simply a recognition of political reality.
“The reason federal fuel excise tax rates haven’t increased since 1993 is because there is a bipartisan recognition that this is very unpopular. Raising any broad-based tax in the current economic climate is a political loser,” Scribner said.
The price people pay for gas at the pump includes the charge for the fuel and state and federal taxes. Gas taxes vary by state, from a low of 8.9 cents a gallon on regular gasoline in Alaska to 57.6 cents a gallon in Pennsylvania, according to the Federation of Tax Administrators.
On top of that, add 18.3 cents per gallon for gasoline or 24.3 cents per gallon for diesel, plus a leaking underground storage tank fee of 1 cent per gallon on everything. That means the taxes people pay on a single gallon of gas will run to at least 27.3 cents per gallon and might go as high as 76 cents before any increases.
However, while Buttigieg’s team may have touted a “variety of options” for how to fund roads, there aren’t many ready sources of revenue to tap. These include raising gas taxes, subsidizing roads out of theoretical general fund money, and, inevitably, tolling roads.
Scribner believes tolls are an idea whose time has come.
“Congress and the administration should seriously look at tolling. Not only is that technology available off the shelf, it can also be used to attract private infrastructure investment and save taxpayers money,” he said.
Gary Biller is the president of the National Motorists Association, which is adamantly opposed to tolling.
“Tolling is an expensive and inefficient way to pay for the infrastructure. The Transportation Research Board has estimated that the administrative, collection, and enforcement costs of toll facilities create an overhead of about 33% of the revenue generated. By comparison … the cost to administer the fuel tax through existing systems is about 1% of revenue,” Biller told the Washington Examiner.
Travelers will often go out of their ways to avoid tolls and divert to roads that weren’t engineered for heavy traffic, bottling and beating them up.
“Congestion delays create lost productivity, and the extra traffic accelerates the maintenance costs of the alternate routes, both hidden costs to tolling,” Biller added.
Scribner conceded that tolling can be a hard sell politically, but he argued that “part of the reason tolls are sometimes unpopular is politicians raid toll revenues” for purposes other than toll roads.
Concern about government officials raiding funds is a constant concern for the funding of infrastructure. Pete Sepp, president of the National Taxpayers Union, told the Washington Examiner, “The conversation about highway revenue has to start with the recognition that too much gas tax money is being diverted away from actually fixing roads.”
He said he believes that “Congress’s missteps and the rise of hybrids and electric cars mean the gas tax is no longer a true road user fee.” The government ought to return people to that concept “by switching to a different revenue source like a vehicle miles traveled fee.”
“Why not consider it now?” Sepp asked, arguing that the idea has bipartisan support. “Politically, it’s no longer much bigger of a task than trying to raise the gas tax.”
Scribner likes the idea and called for a “federal pilot program that builds on the work states have been doing over the last several years on road usage charges,” but he added that a VMT tax is “not ready for prime time” just yet.
Scribner argued that tolls have a substantial financial upside that needs to be appreciated by the government in the short term.
“Infrastructure investment funds around the world love the steady toll revenue and stand-up private toll road managers that tend to be far more efficient than government toll authorities. In the U.S., public employee pension funds would love to invest in domestic infrastructure, but because the U.S. is about three decades behind peer countries, U.S. pension funds are investing in public-private toll road projects overseas instead,” he said.
Susan Howard is the program director for transportation finance for the American Association of State Highway and Transportation Officials. She told the Washington Examiner that “a number of potential funding and finance solutions to fix the struggling Highway Trust Fund have been developed and studied for years. Among those options is increasing the federal motor fuels tax that may include indexing” for inflation.
Howard’s organization believes that it’s Congress’s call what to do here, but in that spirit, it would advise Congress that “the best funding solution will rely on the users of the system.”
