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January 14, 2009
Proposed Gas Tax Hike to Prop Up Highway Trust Fund
With Americans driving less, the federal government has been unable to generate enough revenue from gasoline taxes to keep pace with the cost of highway construction and repair. A Congress-appointed commission is proposing a tax hike to make up for lost revenue.
As manufacturers buckle down to stem their transportation expenditures, a proposal by the National Surface Transportation Infrastructure Financing Commission due later this month may put a snag in their plans. The 15-member panel is reported to be calling for a 50 percent increase in gasoline and diesel fuel taxes to finance highway construction and repair, according to the Associated Press.
Members of the infrastructure financing commission say they will urge Congress to raise the gasoline tax by 10 cents a gallon and the diesel fuel tax by 12 to 15 cents a gallon. The increase would bring the tax for gasoline to 28.4 cents a gallon and as much as 39.4 cents a gallon for diesel fuel. Additionally, the commission allegedly will recommend tying the tax rate to inflation, Outsourced Logistics says.
Extra money must be generated because the current gas tax doesn't pay enough for the upkeep of the U.S. transportation system, Adrian Moore, vice president at the Reason Foundation and a member of the commission, explains to the AP.
As the commission laid out in a February 2008 interim report, the current funding system suffers from three main flaws:
- Insufficient revenue to maintain and improve the transportation network;
- Misalignment between current funding mechanisms and transportation system use, resulting in costs growing faster than revenue; and
- Investment of revenue not cost effective.
According to the commission's draft report, the tax increase is a short-term measure to raise nearly $20 billion more each year than currently collected, Reuters notes. A study by the Transportation Research Board of the National Academies (via the AP) estimated that the annual gap between revenues and the money needed for highway and transit system improvements will increase to $134 billion in 2017 under current trends.
Moore does not support the tax hike, but adds that it's the only solution that can be immediately implemented. He and the rest of the financing commission believe that the long-term solution is a mileage-based revenue system where the vehicle is billed on the number of miles driven, on what type of roads and the time of day. The creation and installation of such a system would take about 10 years, the AP reports.
The tax-hike proposal will be the second increase recommendation made to Congress in a year. Though the first was opposed, an emergency bill in late 2008 moved through Congress and the Bush Administration to pass and sign the needed legislation to prop up the Highway Trust Fund, Outsourced Logistics adds.
If the upcoming tax-increase proposal passes, it will pose more monetary challenges for manufacturers who were already looking to reduce fuel costs. A September 2008 survey of 450 manufacturers in the U.S. and Canada by manufacturing online marketplace MFG.com showed that 28 percent have begun buying materials from suppliers closer to their plants to stem fuel costs. Another 25 percent were reviewing their transportation and logistics contracts to find ways to trim fuel use. Only 14 percent said they would absorb the higher fuel costs and accept lower profits.
Whether the proposed tax hikes will change some manufacturers' minds about absorbing higher fuel costs is yet to be seen.
Another question that remains unanswered is whether tax hikes or usage fees will be more effective in keeping the Highway Trust Fund solvent while keeping costs reasonable for American drivers and businesses. What's your take? Would you rather a tax hike or pay a usage fee?
Resources
Panel Wants Fuel Taxes Hiked to Fund Highways
by Joan Lowy
The Associated Press, Jan. 1, 2009
The Path Forward: Funding and Financing Our Surface Transportation System
National Surface Transportation Infrastructure Financing Commission, February 2008
U.S. Gas Tax Needs Hike, Overhaul: Commission
by Ayesha Rascoe
Reuters, Jan. 3, 2009
Gas Tax Hike or Use Fee?
Outsourced Logistics, Jan. 6, 2009
Manufacturers Seek to Reduce Fuel Costs
by Jeff Moad
Managing Automation, Nov. 7, 2008
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8 CommentsThere is more than enuff money there now but they are using it for everything but what it was meant for.
January 14, 2009 1:26 PMThey should have done that back in the 70's. We would be driving cars now that would get 50 mpg. Go for it, raise them a certain amount each year until it hurts. Then maybe we will become efficient users of our resources.
January 14, 2009 1:28 PMThe Government is always there in a crisis. Always there to see how they can us it to get more of our money.
They did not lower taxes when we were faced with $4 + per gallon.
Our solution was to enable us as remote workers where possible. My commute is 1 day per week for a meeting.
Curious though. If people are driving less, shouldn't there be less wear and tear on the roads.
The contradictions are confusing. Drive less to reduce fuel usage and save the planet, but we are going to punish you with higher taxes if you do.
Talk to your employer if you can work from home, you should be. It saves gas, saves wear and tear ... and now it appears you will pass less taxes. :-)
January 14, 2009 1:57 PMThe real reason that the government can't keep up with cost is the states for years have been using the highway funds for other uses.
Also, the states - Oregon sets the pay leave of what a company pays its workers.
How? By tilling anyone working on government jobs, they must pay what's called prevailing wage (prevailing wage = what government workers are paid). This costs the tax payer almost 2 times what a non-government job would cost. Example: a sign holder on non-government job may get $12.00; this is a range only, but if they're working on a road, that same person doing the same job will be paid somewhere around $25.00 an hour.
Then you take government unions. They don't care what the job market is like because for the most part they're safe from layoffs. Their retirement is well above the average worker, they get paid more and year around, whereas most road workers are laid-off during the winter.
I could go on and on. Sorry.
January 14, 2009 2:03 PMSure, raise gas taxes in an economic recession. How stupid. They don't realize and don't seem to care that high fuel and oil prices is what triggered this recession in the first place.
January 14, 2009 3:52 PMWhen is enough enough? At what point do you tax businesses and individuals to the point you break the backs of the tax payer. Do you see the size of government growing or decreasing? How much of the tax revenue is used to collect and process the tax revenue. They are building more building in DC to house the growing government workforce. Money is wasted at every turn. Baker and Dutch are right, to big a portion of these funds are used for spending not related to their initial intent. Jerry makes a good point, let's raise the tax on the fuel the middle class and the poor need to get to work.
Now RJK, that's right. Screw the working man. Who cares if they can't pay for groceries let's get our political agenda through. Are you nuts?
Tax cuts for the middle class which means checks going out to those who do not pay federal tax. Cut or welfare? Beating up on businesses. Businesses are made up of people not some impersonal entity. Beat on them and lose jobs, retirement investments drop as their stocks tumble. Tax them and they pass it on the average person in the price they charge for their products.
Hold on to your wallets, we are in for a real ride.
January 15, 2009 1:09 PMThis is mostly a response to the comments taking the position that we should not add more taxes to gasoline. I'm in agreement with RJK and in a way with David Hayden:
Whether or not we choose to fund our highways through gas taxes seems to me to be irrelevant, one way or another we will pay. However, one of our most serious national security and economic issues is our dependence on foreign oil or more generally on low cost oil. It is clear that the price of oil affects how much we use of it. With the rise of new large economies around the world the whipsaw effect of demand and oil prices is only going to get worse. I believe it would be a good idea to let the free market work in our favor. -paragraph-
Let's decide to make oil more expensive in a way that is planned and keeps the money in the country rather than sending it abroad. Let's add a significant tax to oil with a planned increase every year for a few years and offset that with an income tax credit or increase in the standard deduction to make it revenue neutral. I have much more faith in a country full of entrepreneurs inventing and individuals modifying their behavior as a means of cutting our dependence on oil than I do in government programs. -paragraph-
I'm talking about taxes on the order of $1/gallon now with an increase of $0.50/gallon each year for six years on all oil not just gasoline, with corresponding offsets in income taxes. There would be dislocations and pain for some with such an approach. But they are the same dislocations and pain caused by increasing world oil prices as we recently experienced. And since we could plan for them they would be more manageable. Which makes the most sense: to continue to focus on the benefits of low energy costs in a way that means that when oil supplies get tight we suck billions of dollars out of the economy and ship them overseas in order to slow our economy enough to reduce demand; or to follow a policy that will result in a managed shift in the way we use energy?
The world demand for energy is going to continue to grow at a rapid rate slowed only when oil prices spike. It seems to me that the clearest path to national security and prosperity is to become the country that depends the least on low cost oil as opposed to the one that depends on it the most.
January 15, 2009 3:36 PM1. There were 6,300 earmarks in the last (TEA-LU) bill, many for such things as museums, bypasses, trollies, parking facilities, landscaping, recreational facilities, highway beautification, street scaping, hiking trails and visitor centers. Yes, a drop in the bucket, but it's a start.
2. Reduce or at least quit expanding what the highway trust funds are used for, such as recreational trails program, truck parking facilities, bicycle and pedestrian safety grants...
22 percent is authorized for programs other than highway and bridge construction and maintenance programs. For example, Senator Durbin wants to take a portion of these taxes - for highways - and build train cars with them.
3. Stop underfunding the program - most budgets over the past 25 years, whether Executive or Legislative, whether republican or democrat, have funded transportation programs at levels below what the trust funds can support.
4. In 1997 Congress
January 20, 2009 7:14 AM
