The Price of Raising Gas Taxes

The government has less money!  Everybody, to the nearest shelter!!  Stock up on the grain pellets!!!  Prepare for the seven trumpets that herald the second coming.  There is no hope!

We do have hope, actually, as spake the prophet Nancy Pelosi:

I do think that if there’s ever going to be an opportunity to raise the gas tax, the time when gas prices are so low — oil prices are so low — is the time to do it.” 

chopper-shot-of-falling-debris-coverRaising taxes on the people.  What a novel idea.  Usually when a politician threatens do raise taxes, they provide us the courtesy of at least pretending there’s a crisis.  In this particular instance, Ms. Pelosi doesn’t even do that initially.  Initially, she simply suggested this was a good time for a tax hike, and when Republicans suggested that it may be a good time, but that they would like an offset somewhere else … say a cut in individual income taxes, even if it’s just middle class tax cuts, Nancy Pelosi wouldn’t respond directly, and she later called it showbiz.  She then said something sensible in her otherwise habitually incoherent press conferences when she said, “How do you relate the gas tax to the Highway Trust Fund.  That’s the relationship that is real.  If there is to be an increase in the gas tax, that’s where those resources should be used.”

The thrust of her message was: put the onus on the people, the voters, or to paraphrase Ms. Pelosi’s like-minded colleague, Harry Reid (Democrat, Nevada) those that smell.  The idea that fluctuations in the gas price, and the subsequent effects it may have on certain allocations, may provide a need to restructure spending occurs to Ms. Pelosi as an afterthought.  The idea that these fluctuations may give rise to the belief that state and federal governments have mismanaged the receipts that come in from the gas tax doesn’t appear to be a pressing issue to her either.  It appears to be more a matter of compromise to her.  The only thing that occurs to her is raising taxes at a time when those that smell may feel it less than at any other time.  To those that flirt with the other “showbiz” notions, Ms. Pelosi has always been quick to dispel such notions, as she did in 2013 on CNN’s State of the Union show:

The cupboard is bare.  There’s no more cuts to make.  It’s really important that people understand that.”

Lower Gas Prices

One of the many factors in the lowering of the gas price is the lower demand the market has seen over the last ten years.  Experts say that the Saudi’s have had an effect, as has the increased supply of oil as a result of domestic production.  Others have said that social pressures, and tax incentives, have led to more people biking to work, walking, carpooling, buying more cars that operate on alternative fuels, and increased CAFE standards on automobile manufacturers have all led to lessen our dependence on foreign oil, and oil in general, until we finally arrived at the glorious day where demand has ticked downwards.

One would think that the effectiveness of these campaigns, that have to be factored into the lowered demand, would be a cause for celebration in the halls of Washington.  One would think that they would even allow those of us that smell into the celebration, and that they would allow us to bask in the reward of our combined efforts to drive supply up and demand down, until it resulted in lower prices and more expendable income in our pockets.  They don’t, of course, they slam the door in our face and tell us there is no celebration, because they have less money.  They tell us that nothing they said in those various social media campaigns, and in various election campaigns, matter now that they’re faced with the reality of having to do our job with less money and the prospect of even less in the future as a result of forecasts of even lower gas demand by the consumer in the future.

The thing is, the current federal gas tax is a fixed 18.4 cents a gallon, as opposed to an 18.4% tax that may have been affected by any fluctuations of the gas price.  The only aspect of this equation that could cause less tax revenue to flow into federal coffers is if the American public purchased fewer gallons of gas, a result that many in Washington have implored for decades, and now that we have reached this point, they believe it open up an excellent opportunity for them to go get more of our hard earned money, because we’ll feel less financial pain from it with the lower prices.

According to the figures compiled by Energy Information Administration officials the consumption of gasoline has ticked slightly downwards over the last ten years, and they predict that a greater drop will occur “as baby boomers age and stop driving, and as more fuel-efficient cars and trucks hit the road, Americans’ gas consumption will ultimately fall.”  They also say that, “Looking forward, we expect to see weakening in gasoline consumption as fuel economy improvements outpace population and miles-traveled growth.”  It’s all resulted in more money in our back pockets, and less in theirs.

As Nancy Pelosi stated with the Saudi’s recent decision to lower oil prices, and keep them flat for an undetermined amount of time, and some would say greater domestic production via fracking, there probably won’t be a better opportunity for Congress to raise taxes now that prices are so low.  This concerned citizen would love to ask Ms. Pelosi, “If the perfect time to raise taxes occurs when gas prices are low, is there going to be a future date that opens up a perfect time for Congress to lower these gas taxes if the gas price should rise again?  Will this gas tax rise and fall in conjunction with the gas price?”  I would then pause to allow for her laughter, and the laughter that arises from anyone that knows how she ran Congress.

To Pay for Infrastructure

The line advocates use for raising gas taxes sound something like this: Gasoline taxes have not been raised in more than 20 years (1993 to be exact).  Our roads and infrastructure are decaying and falling apart.  The news program 60 Minutes had reporter Steve Kroft speak to former secretary of transportation Ray LaHood, on this matter, before gas prices fell to the level they are now.  In this piece, LaHood provided numerous details regarding when certain bridges and roads were constructed, how many cars travel on these roads on average, and how woefully unprepared these roads are for that kind of volume.  They discussed how there simply isn’t enough money to pay for these projects, and how long (under these current financial constraints) it will take to fund the projects that need to be completed throughout the country.

The import of this 60 Minutes piece, and the various articles written on this subject, is that the current situation is unsustainable, and that the current Republican leadership in Congress is largely to blame, though the subjects of the 60 Minutes interview included an asterisk that Democrats didn’t do much either when they were in charge.  The subjects of the 60 Minutes piece also suggest that President George W. Bush is largely to blame for not doing anything about it while he was president:

They had two blue ribbon commissions about infrastructure finance that recommended a lot more money, and additionally the gas tax being increased.”  But Democrat Congressman Earl Blumenauer (Oregon) concluded, “We couldn’t get them to accept being able to move forward.”

He included an asterisk statement that alluded to the fact that President Barack H. Obama hasn’t done anything about it either.  The takeaway from this is that the ordinary citizen has not put enough pressure on Republicans to raise the gas tax, and that Democrats haven’t done so either.  Though he probably would’ve included the latter with a verbal asterisk.

The Allocation of the Gas Tax

When this former transportation secretary’s attempts to make us all feel guilty for the conditions of current roads and bridges concluded, I would ask what percentage of blame should go to the state and federal politicians (Democrats included I would state with a verbal asterisk) for diverting these highway funds to other projects.  I would note for him that in Michigan around 0% of the state gas tax is currently being devoted to the Highway Fund, according to the House Fiscal Agency Memorandum, February 6, 2012.  I would note for him that this fiscal agency states that the sales tax is constitutionally (state constitution) directed to schools and local units of government.  In North Carolina, I would add, a greater percentage of the state’s gas tax goes to pay education, hospitals, and other government programs.  New Jersey allocates a percentage of the tax to paying off debt interest payments, and I would add that the feds have followed suit in using the gas tax to help pay off federal debt.  I would add that while some of these allocations are honorable, and even necessary, now may be the perfect time to restructure how these allocations are made to help pay for all of these infrastructure projects.  The response, if it follows the usual response of those in Washington would be: “Okay, let’s raise the gas tax first, and we’ll follow that up with restructuring the ways in which the tax receipts are spent,” and if the current lot of politicians followed the usual ways of Washington, the latter would probably never get done.

“It is clear,” writes Veronique de Rugy of, “That the diversion of gas tax funds to non-highway projects is the biggest cause of the underfunding problem.”

As Reason Foundation Director of Transportation Policy Robert Poole has explained:

The federal Highway Transportation Fund was invented in 1956, promising motorists and truckers that all proceeds from a new federal gas tax would be spent on building the interstate system.  They aren’t.  Congress has expanded federal highway spending beyond interstates to include all types of roadways.  And since 1982, a portion of “highway user taxes” have been diverted to urban transit (non highway use). Today, the federal role in transportation includes maintaining sidewalks, funding bike paths, and creating scenic trails.

“Poole estimates that some 25 percent of the gas tax goes to non-highway use.  As the Federal Highway Administration’s “Highway Authorizations” table indicates, Congress allocates highway money to truck parking facilities, safety incentives to prevent operation of motor vehicles by intoxicated persons, grants for anti-racial profiling programs, magnetic levitation trains, and dozens of other non-road activities.  He also notes that one of the main diversions of the gas tax is devoted to rail and public transit, which are allocated in this manner to hopefully encourage ridership of public transit.

The gist of this, according to de Rugy, is that it’s the politicians that have “transferred highway dollars to transit programs and increase state and local taxes to fund transit agencies.”

As Poole stated, the hope that politicians have is that increasing the funding for these transit programs will naturally result in more people riding them.  This, according to de Rugy has not happened.  De Rugy cites a figure that states that while the funding of these programs increased by 42% (between the years 1978 and 1995) ridership decreased by 11% during the same time period.  She opines that the only clear beneficiary of this increase in funding, during this time period, were the transit workers, generally members of public sector unions –that, it could be theorized, likely donated to the sympathetic politician’s election campaign.

This 60 Minutes piece concludes with a piece from Kroft’s interview with a past president of the American Society of Civil Engineers, named Andy Herrmann, stating:

You’re sitting there at these committee meetings (in Washington); they seem to agree with you.  Yes, we have to make investments in infrastructure.  Yes, we have to do these things. But then they come around and say, “Well, where are we going to get the money?”  And you sort of sit to yourself and say to yourself, “Well, we elected you to figure that out.”

Where do you get the money, Nancy Pelosi might ask stupefied, from the people.  I can’t believe you’re seriously asking that question, she might add.  One plus one equals two right?  You raise the gas tax, you get more money.  What could be complicated about that?  But, I would say if I were the investigative journalist interviewing her, if you don’t change the manner in which the receipts derived from the gas tax are allocated, how would that resolve the problem?  I understand that your modus operandi in Washington is show me the money, and that’s the driving force behind wanting to increase the gas tax, but if we are specifically talking about fixing the infrastructure in America, and we raise the gas tax without changing the manner in which those tax receipts are allocated, how could that resolve the problem former secretary LaHood calls an unsustainable problem?

Nancy Pelosi, or anyone that thinks like her, would probably point out that the conservative Senator from South Dakota, John Thune — slated to be the new chair of the Commerce, Science, and Transportation Committee — has stated that even he would consider a gas price increase as a way of fixing the Highway Trust Fund in the next Congress. That’s fine, even the most anti-tax advocate would reply, as long as federal and state politicians learn that the short-term method of dipping into the gas tax to magically resolve the problems facing their constituents must end, because as we all now know resolving short-term problems to get re-elected, results in unforeseen long-term complications down the road that do not get covered by investigative journalists.  And this answer to the problem, we all hope Thune recognizes, is two-fold.  Such an approach would probably not be viewed favorably by those politicians that either don’t want to focus on their role in the complicated and unsustainable problem, or the role their fellow politicians have played.  It’s simply less confrontational, and therefore easier, for an investigative journalist, or a sitting Congressman, to focus the resolution of the problem on getting more money out of the people now that we have more a little more of it, and the roads and bridges in our nation are falling apart.


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