Why Are We Talking About the Gas Tax?

As the White House unveils its infrastructure plan, many are left scratching their heads on the issue of funding. With the federal government already running large deficits and many states struggling to fund necessary expenditures, this infrastructure plan seems to be more of an aspirational document than an actual blueprint for infrastructure spending. In other words, it basically says that we should be spending $1.5 trillion on infrastructure development but no one actually wants to dedicate that sum so let's assume the money will come from somewhere.

One idea that has come back to the forefront is raising the gas tax. This blog will not take a position on this issue but we want you to understand this topic and its ramifications. The federal gas tax costs you about 18.4 cents on every gallon of gas that you purchase. That money comes from consumers all around the country and it goes into the Highway Trust Fund which doles it out for infrastructure projects. This system worked for quite a while but then two things happened.

First, the gas tax stopped getting raised even to keep pace with inflation. The tax has remained the same for twenty five years even as America's population and infrastructure needs continued to grow. 

Second, cars became far more fuel efficient. In addition to regular cars needing less gas, hybrids reduce the need for gas even further and electric cars require no gas. This means that in addition to the gas tax remaining relatively low for two and a half decades, people don't need to buy as much gas so their contribution to the gas tax has diminished or (in the case of electric cars) their contribution is now nonexistent. Also, many millenials are rejecting America's traditional car culture in search of public transportation and other options for sharing the cost of travel which reduces their contribution to the gas tax.

The fact is that the gas tax is increasingly archaic and needs to be replaced. A mileage based user fee, which tracks miles traveled by vehicles and charges them accordingly, is a far more practical approach. In the age of smart phones, GPS, smart cars, and even smart infrastructure, there is no reason why we can't incorporate this technology to make user fees fair and adequate. Several states are already experimenting with this model. This will be the future of infrastructure user fees. Even if we increase the gas tax, that model of infrastructure funding will continue to be less and less effective in the coming years.

And, as always, we support creating a National Infrastructure Bank and bringing back the Build America Bonds program.