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Shifting Transportation Funding Out of Neutral

August 05, 2010 By Conrad deFiebre, Transportation Fellow

USA Today, the bland national daily that's been derided as the Newspaper From Nowhere, editorialized last week in favor of a steep increase in the federal fuel tax - up to a dollar a gallon added to the current levy of 18.4 cents, phased in by a penny or two a month over as much as four years.

The newspaper, not known for radical policy pronouncements, backed up the proposal with strong economic and national security arguments, which we'll get to shortly. But even more surprising than USA Today's foray into the land of sensible but unpopular ideas was the response it published from the National Petrochemical & Refiners Association, an oil industry lobbying group.

Charles T. Drevna, the association's president, branded the dollar-a-gallon proposal the equivalent of "imposing economic sanctions on ourselves" and a surefire route to higher unemployment and small business failures. No surprises there. But then Drevna goes on:

"It makes sense for Congress to consider approving a small increase in the federal gasoline tax - a handful of pennies per gallon - if the money raised would go to the Highway Trust Fund to maintain, improve and expand our nation's road system. Using some of this money to fund mass transit, to further reduce gasoline consumption, is also worth considering."

Holy Moley, Rocky! What's this world coming to if even people in the oil bidness won't rule out a modest boost in the federal fuel tax, which has been stuck in neutral since 1993? Of course, we've been similarly shocked before: The U.S. Chamber of Commerce, the National Association of Manufacturers and the American Trucking Association also favor raising the gas tax.

Besides the usual reactionaries of the no-new-taxes-no-matter-what crowd, that leaves virtually just one other bastion of opposition to allowing user fees that pay for our roads and bridges to catch up with inflation and the nation's crumbling infrastructure - the Obama administration.

Ever since taking office in January 2009, President Obama's transportation secretary, Ray LaHood, has consistently repeated that the president will not support an increase in the gas tax, or even the alternative of establishing a national mileage fee system. Instead, LaHood talks vaguely about public-private partnerships and bond-related financing for highway projects. He's promising detailed proposals "very soon."

Meanwhile, however, it's not hard to see why the brainy folks in the White House would tread carefully around this policy land mine. A new national poll shows that only 18 percent of Americans favor increasing the gas tax for new roads, while 41 percent each prefer tolls or, alternately, no new roads at all. Only 16 percent said tolls should never be used.

The survey from HNTB Corp., a Kansas City-based infrastructure planning and management firm, also found that tolling is a clear winner with the public for financing long-term transportation improvements. It got support from 39 percent of respondents, compared with 29 percent for higher transit fares, 24 percent for doing nothing, 20 percent for sales taxes and 18 percent for increased gas taxes. (Respondents could choose more than one option.) Other taxes fared even worse in the survey: 11 percent for the income tax and 9 percent for property taxes.

Unbeknownst to many, though, those two non-user levies already heavily subsidize motor vehicle transportation in America: well over $1 billion a year in property taxes for local roads and bridges in Minnesota, and more than $15 billion and counting in federal general fund transfers - deficit spending backed by income taxes - to the Highway Trust Fund since 2008.

Tolling, despite its apparent popularity with the public, appears to offer only a long-range solution to a much more imminent crisis. Even at that, its applicability will be limited to a tiny percentage of the road system. In places like Minnesota, where toll roads have not been part of our modern culture, it can give drivers a chance to pay for access to open lanes alongside congested freeways, but won't raise significant money for construction or maintenance.

And that brings us back to gas taxes, which are lower in real dollars now than they've been in decades - about half of the 1970 level per mile driven when adjusted for inflation.

USA Today's editorial noted that it's been two years since a spike in crude oil prices drove gas pump meters above $4 a gallon and 37 years since the 1973 Arab oil embargo caused long lines at gas stations. In that year, the United States imported 30 percent of its oil. Now we import 68 percent.

What have we done since then to reduce our vulnerability to the whims of the international oil market, hostile petro-states and polluter companies such as BP?

"Not nearly enough," the newspaper said. "That's too bad. Because if there's one thing that really works, it's price. Consider what happened when gasoline prices spiked in 2008. It was painful for just about everyone, and particularly hard on lower-income people and those who had to drive long distances. But it did more to change habits and reduce oil usage than anything Congress and a parade of presidents had done in decades ...

"Four decades of experience suggest that the only way to wean the nation off its ruinous oil addiction is prices that go up and stay up. And, although it's a political non-starter for now, the simplest and best way to achieve that is to gradually raise the federal gasoline tax."

The extra money could fix roads and bridges and reduce the budget deficit, the paper added. It would make fuel-efficient cars more attractive and drive alternative energy technologies to market.

 "A gradual increase would also send an unmistakable message that the price of gasoline will eventually rise to reflect its real cost to the economy, the environment and national security," the editorial said. "And it would give car owners plenty of time to plan for a change ... The alternative is a status quo where nothing changes except the amount of environmental degradation and the nation's weakness in the face of foreign oil suppliers."

To that bleak picture we can add the prospect of more falling bridges, plus a tripling of poor highway pavement, which the Minnesota Department of Transportation projects over the next decade under current revenue streams. Our state has actually been an outlier in raising the gas tax two years ago, but it's still well below the national average and clearly not up to the job of keeping us moving safely, efficiently and prosperously.

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