The Gas Tax Doesn’t Work Anymore

The current system for funding the Highway Trust Fund just doesn’t work. Evidence of this was reported in this morning’s Wall Street Journal. Just weeks after presidential candidate Barack Obama warned of the fiscal consequences of suspending the gas tax that funds the system, the trust fund reported an anticipated $3 billion shortfall in next year’s revenue. Americans drove 1.8% fewer miles in April than in the year prior, and that followed a 1.7% decrease in the five months prior. With ever rising gas prices and a contracting economy, this situation is unlikely to reverse itself in the near term. This leaves Congress and the Transportation Department in a particularly uncomfortable situation. Raising the gas tax (currently 18.4 cents for gasoline, 24.4 cents for diesel) is political suicide. That notwithstanding, Transportation Secretary Mary Peters has no interest in raising the tax, instead favoring a reform of the funding system altogether. “We’re burning less fuel as energy costs change driving patterns…which is exactly why we need a more effective funding source than the gas tax.” Ms. Peters, however, offered little in the way of ideas for how to accomplish this task beyond expressing a desire for increased involvement from the private sector. This idea is nothing new; earlier this year Pennsylvania announced plans to lease its turnpike to a private operator. Chicago has already done the same with its Skyway, signing a 99-year lease with a company jointly owned by Cintra Concesiones de Infraestructuras de Transporte S.A. and Macquarie Infrastructure Group. While this option may be feasible for the nation’s toll roads, it is unlikely that private industry would be willing to lease a road from which it cannot derive any toll revenue. For now, this leaves the problem at the doorstep of Congress. The Journal reports that Senators Max Baucus and Chuck Grassley have proposed a $5 billion infusion to both close the gap and fund approved projects, while others in Washington would like to include infrastructure funds in a second economic stimulus bill being considered for later this year.