Begin Anew

The Federal Highway system and Trust Fund are roughly 60 years old. Instead of just increasing the fuel tax to cover the shortfall in the Highway Trust Fund, something that clearly is needed, Congress should rethink the interstate highway system and how to maintain and improve it in the 21st century. No program should just keep on keeping on. And, certainly the motivation for increasing the fuel tax should not be the fact that oil prices have fallen almost 50%. Nor should that be a backdoor way to impose a carbon tax as suggested by former Treasury Secretary and White House advisor Larry Summers.

The Highway Trust Fund was created for the sole purpose of building and maintaining the interstate highway system and certain other roads. Since the 1970s, the use of the fund was expanded to cover mass transit, bike paths, leaking underground storage tanks, and other “enhancements” which give members of Congress a way to dole out pork.

In 2010, The Reason Foundation issued a report, Restoring Trust in the Highway Trust Fund that laid out a plan of action to update and refocus the trust fund and the role of the National Highway & Traffic Safety Administration. Reason identified four major goals for federal funding and involvement in transportation issues:

– Maintaining the Interstate System
– Multi-state coordination
– Maintaining freight corridors
– Transportation research and safety

An increase in the fuel tax should be tied to a complete overhaul and rethinking of our national highway system and the most cost-effective ways of maintaining its utility and effectiveness.

Since the fuel tax has not been increased in over 20 years, it should be promptly increased over a finite period of time to restore the trust fund to the level that is needed for its maintenance function. In connection with that action, states should be required to maintain their state fund levels as a condition of receiving federal funds. According to the Reason study only 21 states have increased their fuels taxes in the past two decades. That reflects political pandering instead on enlightened leadership.

While increasing the fuels tax is necessary, it is hardly sufficient. The highway system needs a modern day systems management approach to address congestion, making more efficient use of roads, recognizing that they should not be considered a free good, and financing that does not rely exclusively on fuels taxes since non-traditional vehicles—hybrids, EVs—and CAFÉ distort the user pays principle.

In Monday’s Washington Post, Larry Summers used the drop in oil prices as a reason to adopt a carbon tax to more comprehensively address the full range of externalities involved in using carbon based fuels. Implicitly, this would supplement funding for the Highway Trust Fund. While economists in the halls of academe find a carbon tax intellectually intriguing and elegant, Mr. Summers surely realizes that it would become a mechanism to expand “Bootlegger and Baptist” schemes to raid federal coffers and provide Congress with the equivalent of an ATM machine. The George C. Marshall Institute issued a report in 2013, A Skeptical Look at a Carbon Tax that should chill any affection for a carbon tax.

 

This article appeared on the National Journal’s Energy Insiders weblog at http://www.nationaljournal.com/policy/insiders/energy/is-the-time-right-for-a-gas-tax-hike-20150105

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