Bloomberg News

With Gas Tax on Empty U.S. Must Find New Way to Fund Roads: View

February 26, 2012

Photograph by Benjamin Rondel; Illustration by Bloomberg View

Photograph by Benjamin Rondel; Illustration by Bloomberg View

In 2005, Congress passed a legislative monstrosity popularly known as the transportation bill that funded Alaska’s infamous “Bridge to Nowhere.”

The bridge was never built, and now the law itself may finally expire -- after having been extended several times -- at the end of next month.

Washington is now arguing over several bad new ways to pay for transportation infrastructure in the U.S. But despite their deficiencies, recent proposals from the White House, the Senate and the House offer a few ideas worth considering as part of a more ambitious funding bill down the road, when a looming election isn’t inducing timidity and self-delusion.

Most glaringly, what all three proposals lack is a realistic or long-term source of funding. The White House hopes to pay for its six-year, $476 billion plan by “ramping down overseas military operations.” The Senate’s two-year, $109 billion bipartisan measure would invoke such exotic revenue sources as raiding the Leaking Underground Storage Tank Trust Fund, also known as the LUST Trust Fund, and taxing imported Malaysian cars.

The five-year, $260 billion plan that House Republicans put forward, meanwhile, envisioned collecting revenue from currently nonexistent domestic drilling projects and ending guaranteed funding for mass transit. (That plan -- which Transportation Secretary Ray LaHood, a Republican, called “the worst transportation bill I’ve ever seen during 35 years of public service” -- was so egregiously political and unfeasible that House Republicans now intend to rewrite it.)

Trust Fund Insolvency

The reason everyone is resorting to such sophistry is that the Highway Trust Fund, which gets the bulk of its revenue from a federal excise tax on gasoline of 18.4 cents per gallon, is nearly bankrupt. Because the tax isn’t adjusted for inflation, and has been pegged at the same rate since 1993, it has covered less and less of U.S. transportation spending. The Congressional Budget Office says the trust fund could be insolvent as soon as October.

Why not just increase the gas tax? Plenty of wise people have advocated doing just that. The Simpson-Bowles fiscal-reform commission recommended an immediate increase of 15 cents per gallon. Republican Senators Mike Enzi and Tom Coburn have sensibly suggested indexing the tax to inflation.

Increasing the tax modestly in the short term might make sense to keep the trust fund solvent. But ultimately the federal gas tax is an insufficient mechanism. As cars grow more fuel efficient -- and as the federal government, across a range of agencies and departments, encourages new sources of energy and more conservation -- the revenue the tax will produce is certain to diminish. Not to mention that any action that would increase gas prices is a political nonstarter: The Obama administration and numerous Republicans have already ruled it out.

Finding a sustainable new funding source, then, will take a combination of creative approaches. The first is technological. One promising future replacement for the gas tax is a “vehicle miles-traveled fee,” which would use satellite tracking or a variety of other methods to charge drivers by mileage, regardless of the fuel they use. The technology required for widespread use of such a system is years away, and protecting privacy while monitoring driving habits will be a challenge. But the concept -- placing the funding burden directly on those who use the roads -- is a smart one.

In the meantime, the U.S. should encourage experimentation with other user fees that harness technology, from advanced electronic tolling to congestion pricing.

Private Investment

Second, Congress should seek out more and better public- private partnerships for construction projects. The House, Senate and White House proposals all substantially increase cash for something called the Transportation Infrastructure Finance and Innovation Act (or TIFIA), which provides credit assistance for big projects that include such partnerships. This is exactly what we need more of: In its 12 years of operation, according to a Bloomberg Government legislative analysis, TIFIA has used $8.6 billion in federal money to attract more than $33 billion in investment. This isn’t free money, but it’s a smart way to spend.

Finally, the nuts and bolts of transportation funding need to be modernized. The proposals from both chambers have rightly prioritized cutting red tape to speed construction -- it now takes 11 years to complete the average transportation project -- and the House is correct to emphasize eliminating earmarks. The White House plan makes an admirable effort at consolidating the vast transportation bureaucracy.

Many in Congress have suggested giving states more flexibility in the way they use federal dollars. Because most innovations in transportation finance will emerge at the state or local level, Washington should leverage local investment, offer ideas and incentives for efficiency, and otherwise try to avoid being meddlesome.

For now, we reluctantly endorse the Senate’s modest two- year bill, which the White House also supports. We hope it can set the stage for a creative and ambitious new plan after the election -- one that has the courage to embrace new technology, encourage private development and raise revenue that isn’t imaginary.

Read more opinion online from Bloomberg View.

To contact the Bloomberg View editorial board: view@bloomberg.net.


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