President Trump’s infrastructure proposal has resulted in a re-examination of the role of the gasoline tax with the Chamber of Commerce leading the way in call for a 25 cent increase. Although the President and the American Society of Civil Engineer claim that our infrastructure is crumbling or is close to failing, the Department of Transportation paints a much different picture, reporting that the highway and road system have changed little in the past decade.
The 1956 Highway Revenue Act created the Highway Trust Fund as a mechanism for funding the interstate highway system and aiding in the finance of rural and urban routes. The tax set at that time was 4 cents per gallon. It took until 1983 to raise it to 9 cents. In 1990, Congress raised it to 14 cents and in 1993 is was raised to today’s level of 18.4 cents. Adjusted for inflation, based on BLS data the 1956 tax would be 32 cents in today’s dollars.
The fact that the tax has increased so slowly over past decades is a reflection of political reluctance to impose any tax that makes clear to those who pay it who is responsible for imposing it. In the last 15 years, 21 states made no changes in their gasoline tax and only 5 increased the tax by more than 5 cents. Since the tax is a users fee, the failure to increase it, even at the rate of inflation, means that non drivers are subsidizing those who do.
When Congress passed the Interstate Transportation act in 1991 it allowed the Trust fund to be used for more than highways, roads, and bridges—public transportation and bike paths for example. Today, the Trust fund spends more than it takes in with the shortfall being made up with general revenue. In the decade ahead, the Fund faces a shortfall of over $160 billion. So, either general revenue must be used, increasing the deficit even more or there needs to be a program to increase in the gasoline tax on a regular basis.
Congress and state officials have to face up to the inevitable and quit procrastinating. Every penny increase in the tax will raise about $1.5 billion. An alternative frequently suggested is a fee based on vehicle miles traveled. That may sound good in theory given the increase in high mileage cars but it would penalize rural drivers and those who live in the mountain states. That fee fails the equity tax.
Users need to pay; it’s that simple.