Taxes, Tolls and Politics

It is usually refreshing when a political promise is kept, but when prevailing circumstances and economics justify making a change, a pledge can be taken too far. Absolutes in politics can lead to unintended consequences.  Rather than trust citizens to understand and accept circumstantial changes, politicians often just remain dogmatic.

The anti-tax position of Virginia Governor Bob McDonnell is case in point.  A fiscal conservative who ran as a “no tax increase” candidate, Governor McDonnell has been trying to square his position with the need for more revenue to improve the commonwealth’s transportation infrastructure.  His choices are to raise the fuel tax – which is in reality a user fee – or impose tolls on certain roads.  He has chosen the latter, although his choice is clearly the worst of the options.  In response to his decision, the Richmond Times Dispatch dubbed the Governor, “Mr. Inefficiency.”

Interstate 95 is the busiest major route from the Northeast to Florida.  It is heavily traveled by commercial vehicles, local commuters, and interstate travelers.  The governor has proposed installing tolls near the North Carolina border.  The Times Dispatch pointed out that with tolls all drivers pay the same fee independent of the wear and tear they cause.  And, with the toll system being proposed, toll booth and collectors are needed, the cost of which will reduce revenue by almost half.  Additionally, the tolls would cost motorists time by creating bottlenecks that slow traffic.

According to the Times Dispatch, a one penny per gallon increase in the gasoline tax would raise $50 million a year, much more than the $35 to $40 million estimated to be raised by tolls. In Virginia, the gasoline tax has not been increased in over 25 years.  While the cost of road construction and repair has steadily increased, the purchasing power of the revenue from the gasoline tax has been halved.  The situation in Virginia is not unique.  Many states have been slow to increase gasoline taxes even though our infrastructure has been deteriorating from lack of adequate maintenance.

Why this reluctance to ask users to pay their fair share for road maintenance?  Pure politics.  Imposing a toll imposes the cost largely on out-of-state road users; nearly half of motorist traveling along I-95 proceed through Virginia.  Using general tax funds, on the other hand, spreads costs among all citizens.  It only takes a bit of simple math to realize the latter case diverts funds from other uses, which can create a budget problem if not offset elsewhere.  With the budget already stretched thin the Governor is left with only two options – cut programs or raise taxes (such as the gasoline tax).

The toll issue in Virginia is symptomatic of a larger national problem. The beltway paper Politico recently ran an article that raised the possibility of a higher gasoline tax:

“As lawmakers and transportation wonks look to the next transportation bill, could a gas tax hike be in the works to help pay for more infrastructure? The Highway Trust Fund, which is fueled by an 18.4 cents-per-gallon tax on gasoline, can’t keep up with demand anymore. The last time the gas tax was raised was 1993. Now, thanks to inflation, it would take 29 cents in 2012 dollars to purchase what 18 cents did in 1993.”

While an increase in fuel taxes makes sense, don’t bet on members of Congress having the courage to support them, at least not until after November.

We live in a time when citizens ask for more and more services and politicians are all too eager to promise just that.  But at the end of the day, no one wants to foot the bill.  That is the heart of our current fiscal situation, which will only get worse.  The Simpson-Bowles Commission, appointed by the President, laid out a corrective course of action, making clear that there is no such thing as a free lunch. Sadly, so far neither the President nor Congress has had the courage to start down the road of putting our fiscal house in order.

This article appeared on the weblog FuelFix on August 23, 2012

Partner & Fellow Blogs