By Giovanna da Silva
As a part of his plan to revamp US public infrastructure, President Donald Trump recently suggested increasing the gasoline tax to 25 cents a gallon from the current rate of 18.4 cents per gallon to help fund his $1.5 trillion infrastructure plan. This isn’t a new idea, however, as proposals for raising the gas tax have received bipartisan support over the years. In March of 2018, both Republicans and Democrats in the House of Representatives endorsed increasing the gas tax to 25 cents.
While a large portion of highway funding is funded by fuel taxes, the revenue is spent on different state and federal projects ranging from maintaining the interstate highways to setting up bike paths. The broad usage of funding limits the amount of money allocated to financing roads and highways, thus frequently resulting in funding shortages and a chronic inability to sufficiently maintain our roadways.
The US highway system is vastly outdated and underfunded. President Trump recognized the problem in the White House infrastructure plan, noting: “Our Nation’s infrastructure is in an unacceptable state of disrepair, which damages our country’s competitiveness and our citizens’ quality of life. For too long, lawmakers have invested in infrastructure inefficiently, ignored critical needs, and allowed it to deteriorate…It is time to give Americans the working, modern infrastructure they deserve.”
While the President’s sentiment is valid, looking at potential alternatives to gas taxes may be beneficial towards offsetting funding gaps and financing public infrastructure.
Since funding for infrastructure is not distributed equitably, states often lobby the federal government for a larger share of fuel tax revenue to build and maintain transportation infrastructure. Local governments also lobby states for increased funding for their road projects. As tax revenues are not disbursed equilaterally among states or local governments, taxpayers who pay for the maintenance of public roads through taxes may not receive an equal return on their investment. The state of Texas, for instance, receives a negative return on the money its citizens provide in gas taxes to the Federal Highway Fund.
Robert Poole, director of transportation policy at the Reason Foundation, advocates for a narrower use of federal gas taxes. He argues that the federal government has exceeded its responsibility to facilitate and regulate interstate commerce by funding state road and transportation projects. Instead, federal gas taxes ought to be restricted to financing interstate highways. States should finance their own roads by seeking private investment from public-private partnerships and using revenue from toll roads. He states that his plan would increase federal investment of interstate highways by $10 billion a year.
Increasing federal gas taxes to 25 cents does not ensure an effective distribution of funds to high priority projects. Replacing gas taxes with market pricing for roads via tolls could act as a viable alternative to the current funding system. Tolls link roadway use directly to consumers based on their use of the highway. Through market competition, companies in charge of the roads could be held accountable for refusing to properly maintain highways, as engaging in that type of behavior would drive customers to support their competitors. This coupled with limiting the scope of fuel tax revenues to fund interstate projects would ensure that infrastructure is well maintained and serves consumer interests.