By John Schwartz, February 14, 2013, New York Times
In the great taxation debate of 2013, there is another issue that is bedeviling lawmakers at the state and federal level.
Governments are struggling with good news that has a fiscal downside. Cars are becoming more efficient, alternative fuels are on the rise and people are driving less. That is good for the environment, but bad for the revenues that go into building and maintaining roads, because it means that the money collected from gasoline taxes has been dwindling while costs climb.
Fuel taxes provide some 40 percent of state highway revenues and 92 percent of the federal highway trust fund, according to the National Conference of State Legislatures. But the funds, squeezed by fuel economy, are not keeping up with the nation’s infrastructure needs. Moreover, according to figures collected by the organization, only about a dozen states tie their tax to inflation, which means that the revenue loses ground every year. Seventeen states have not raised their gas taxes in at least 20 years; only six states and the District of Columbia have raised their gas taxes since 2008. The federal gas tax, currently 18.4 cents per gallon, has not been raised since 1997.
Even some business interests normally opposed to higher taxes have called for an increase. In Congressional testimony this week, Thomas J. Donohue, the chief executive of the U.S. Chamber of Commerce, said: “The money is running out, so we need to phase in a moderate increase in the gas tax over a number of years and index it to inflation. Shippers and truckers are all on board to pay a little more as long as the money goes to where it’s needed.”
The situation has also led some to suggest a radical rethinking of road financing. Gov. Bob McDonnell of Virginia addressed the issue last month with a controversial proposal: get rid of the tax on gasoline altogether and increase the state’s sales tax to fill most of the funding gap that the move would create.
“We simply cannot continue to do what we have always done and expect this problem to go away,” Mr. McDonnell said in announcing the plan, which did retain taxes on diesel fuel and call for a $100 annual fee on cars that run on alternative fuels.
But to many infrastructure experts, the plan abandoned a core concept in transportation investment: the user pays. For Robert W. Poole Jr., director of transportation policy for the Reason Foundation, a libertarian research organization, the plan is “a disaster, for all kinds of reasons.” The logic of the proposal, he said, escapes him: “It looks like the governor just grabbed this out of thin air.”
Jeff Caldwell, the governor’s spokesman, says a broad-based sales tax makes sense because even people who never drive benefit from roads, bridges and other transportation projects financed with the tax. “Every good or service that they receive or purchase uses transportation at some point,” he said.
While the idea might not survive the legislative session, it has blown open the staid world of infrastructure financing — and not all of the response has been negative. “It is a bold proposal that has drawn high-profile attention to transportation funding issues — not just in Virginia, but across the country,” said Jaime Rall, transportation senior policy specialist at the National Conference of State Legislatures. “In that sense it has already been successful.”
Joshua Schank, the chief executive of the Eno Center for Transportation in Washington, said: “At least they’re trying to do something.”
Other states are looking to new ways, beyond simple gas tax increases, of filling in the funding gap. A number of states, including Oregon and Washington, are taking a close look at a plan that transportation experts like Mr. Poole favor: charging users based on the number of miles they drive.
When discussed in the abstract, such plans evoke Big-Brother nightmares of GPS-enabled black boxes that will track a driver’s every move. In practice, Mr. Poole notes, a rough system can be developed using the E-ZPass systems already in place in many states, or even lower-tech systems that do not track driver movement at all. Oregon’s legislation would impose the mileage tax on fuel-efficient car models coming out in 2015 or later; the state is currently running a small pilot program to test five alternatives for measuring mileage that include such things as GPS devices and smartphones. There is even a flat-fee option for those who do not wish to be tracked at all.
In Virginia, other proposals are gaining ground, including an approach passed by the state Senate that would keep the gas tax — and even raise it and tie it to inflation. The governor, who is in the last year of his term-limited time in office, has said he would entertain a compromise that retained the gas tax along with other measures.
But Mr. Schank of the Eno Institute said that ultimately, more states might turn to sales taxes as an alternative to the gas tax, because “People generally prefer a sales tax to these other forms of taxation,” and have generally lost faith in the notion that their gas tax they pay goes to identifiable projects that affect their lives. “You have to give them a clear idea of how you’re going to use their money if you’re going to get their support for tax increases,” he said.
The problem, as Governor McDonnell of Virginia put it, is that the problem of dealing with declining gas tax revenues isn’t going anywhere — and must be dealt with one way or another. “If we stick to the same old means of funding transportation, we will find ourselves having the same debates and facing the same revenue shortfalls over and over again.”