Transportation, The Gas Tax, and Tom Graves

This article from the Hill helps frame the national issue of the Federal Highway Trust fund’s pending renewal, and it’s implications on Georgia.

It begins by talking about a fancy new calculator by the American Road and Transportation Builders Association that allows you to rejigger some numbers around and see what the effects of budget is on transportation. It’s kinda cool, especially if you are a bit on the wonk side like me.

However, the creation of this calculator is not the full body of the article. Instead there are some interesting questions that arise about the funding of our highway infrastructure. For instance, the federal gas tax hasn’t been raised in 20 years. Consequently in an era of dramatically increased fuel economy (and thus generating less money per mile driven) the funds can’t keep up with demand.

Because of this funding discrepancy and the fact that the current Highway Trust Fund will expire in September 2014, the ARTBA has narrowed the outcomes to four options.

  1. Let the Highway Trust Fund go over the fiscal cliff
  2. Steal from other areas of discretionary spending
  3. Borrow from the general fund and add to the deficit
  4. Raise new revenues

Their prefered option is to raise the gas tax another 4.3 cents just like in 1993. In their own words this should take the  Highway Trust Fund from “still stuck in traffic” to “green light.”

Tom Graves from Georgia’s 14th district has a different idea. In his Transportation Empowerment Act, his plan phases the current 18.4 cent federal gas tax to 3.7 cents, with the difference going directly to states in the form of a block grant. After a few years the block grant phases out and it is up to the states to raise enough revenue for their needs.

To me this seems like an interesting conundrum. Obviously, there is inefficiency in the current government plan. Though there is almost always inefficiency in any government plan. If we raise the federal gas tax, there could be more work done to improve infrastructure.  If Georgia were to raise the gas tax on its own, and/or maintain the existing amount paid to the federal government as a state tax, then more money could be distributed locally under priorities decided here.

The Graves plan also looks interesting in that some of the inefficiencies will be mitigated. But, I think the Graves plan hinders the construction of a thoughtful planned infrastructure. Think the Johnson’s Ferry Road deal between Fulton and Cobb counties but at a much bigger level as we try to move beyond Georgia and travel state to state.

With this plan, most states will have to increase the gas tax they already collect. I can’t say I really see the benefit since it will be called a tax increase either way and the loss of coordination and planning abilities with the Graves plan.

At the end of the day, the bigger point is this:  We’re about to have a national conservation about how best to fund transportation.  Regardless of who is levying and collecting the taxes, the money we generate per vehicle mile traveled via the gas tax is falling, at the same time our needs continue to increase.

33 comments

  1. John Konop says:

    Infrastructure investment has always been a major economic driver in our economy from Lewis and Clark, railroads, airports, roads, electronic grid, ports…..The lack of infrastructure investment is a key reason the USSR fell apart……Smart infrastructure investment has been a major driver behind GDP growth even now ie internet, Nanotechnology, DNA, transportation …….Obviously a lack of solid infrastructure can be a lag on the economy.

    That is why we need a real plan on top of the sliding dollars via energy efficiency. Tom Graves idea would be a USSR style death march to GDP.

    I would suggest we first We use a Bipartisan bill that use a combination of private and public money that creates a bank that could be used to upgrade our crumbling infrastructure. As the below plan creates GDP growth we slowly raise the need tax.

    http://thehill.com/blogs/on-the-money/appropriations/165357-kerry-sees-progress-on-infrastructure-bank-bill

    ………..The Kerry bill, co-sponsored by Sens. Mark Warner (D-Va.), Kay Bailey Hutchison (R-Texas) and Lindsey Graham (R-S.C.), would create an independent, non-profit bank that would leverage private investment into infrastructure projects. The bill was introduced in March………….

      • John Konop says:

        Yes, It is a concept that can be used now or in the future. As I said we could slowly raise taxes if needed, but the above plan would be a big shot in the arm for infastructure and the economy, without raising taxes now.

    • Dave Bearse says:

      We can borrow the difference between tax revenue and expenses at only a few percent if need be. What’s the advantage in using private money that will cost more than twice that?

      • John Konop says:

        Dave the concept is to lowering liability and leverage on the public sector, and move it toward the private sector. By creating a bank the leverage can be about 10 to 1 ie debt to equity ratio for lending.

        For example:

        We could build a high speed rail system, the revanue from the passéngers……would be used to pay back the bank. Tax payers would only put up a small portion of tax revanue for equity and it would be leveraged at up to 10 to 1. The majority of equity would be put up by a private equity. We could put in a requirement for surity bonds for projects to make sure tax payers do not get left on the hook. Also the bonding company would vet out the project to make sure it made sense, since they are on the hook.

  2. George Chidi says:

    I opposed the T-SPLOST for a few reasons — not enough light rail, no guarantees that the Emory University MARTA line would get built, over-emphasis on roads, a lack of confidence that the oversight board would be responsive and honest — and this one, big reason: A general sales tax is a stupid way to pay for transportation.

    Sales taxes might be justifiable to pay for rail, since there’s a public policy benefit to creating commercial nodes around rail stops. Boston is largely organized around the stations for its T trains, for example. But roads? That’s a gas tax. You drive, you pay. It’s the fairest thing, and it’s perfectly predictable revenue relative to the use of that revenue for road maintenance.

    But the miserable cowards in the state house can’t bring themselves to raise the state gas tax here to cover the cost of maintaining the sprawling road network that fed the boom (and bust) development in Cobb and Gwinnett, because we’re governed by radical conservatives who resist the math. Hence the epic can-kicking for the T-SPLOST idiocy.

    Were Graves’ plan to see fruition, politically ambitious conservatives would break out in an anti-tax bidding war to keep from raising the local gas tax to match the reductions in the federal tax. Never mind that we spend less on roads per capita or per road mile than almost anyone else in America, and forget that keeping a road paved is pretty much the definition of a government activity for anyone who isn’t to the right of … well, Tom Graves, for one … you can see how the tax debate would be demagogued.

    And so can Graves, of course.

    Estimate costs for road maintenance based on use, figure out how many gallons of gas are sold in a year in this state, take the portion of that cost per gallon of gas at average fuel economy and add it as a tax, with allowances made for the elasticity of demand. This shouldn’t be a political question at all.

    • saltycracker says:

      Nor should applying the same upkeep cost/use principles to bus/rail fares.
      Agree to raising the gas taxes and the tax on vehicle sales.

      • +1. Take the amount of maintenance dollars needed for whatever public transit system, divide it by the number of trips / tickets sold on an annual basis and that’s what you charge per ticket. Cobb County’s CCT is subsidized with millions of taxpayer dollars every year that could perhaps otherwise come from its ridership.

        • Yeah but that’s a poor way to do things. Why are conservatives so eager to apply that standard to public transit but not (to choose just one example) switch the gas tax to an annual miles driven tax? Part of public transit in Cobb and elsewhere is paratransit – do we really expect someone who is poor and handicapped to pay their own way? They’d never be able to go anywhere.

          And besides, doing some back of the envelope math, fares probably cover about 75% of the budget. Maybe if you raise fares, ridership goes down and it covers less than what it currently covers. At the end of the day, spending a few million dollars to provide county residents with an available transportation option of last resort and taking about 12,000 trips that would be in cars off the road on a daily basis is a good investment.

          • MattMD says:

            Just doing some Googling, there isn’t a public transportation system in the USA that has a farebox recovery of 75%. MARTA is around 31.8%. DC (WMATA), Philly and SF (BART) had the best percentages, all in the 60’s. They are also all distance-based which MARTA simply will not do. If may be mind blowing but many regions like DC and SF have a central system they buy into and then counties still create their own supplemental systems.

            Anyhow, Cobb and Gwinnett did the region no favors by opting out back in the 60’s. We could have had a much better, more thorough system.

            • saltycracker says:

              Yes, I was having more fun fantasizing on the “annual miles driven tax” idea. Dave’s horse trailer pulling Excursion paying the same road tax as Chris´ prius, or probably much less. Our working with our legislators to get mileage exemptions/exclusions or the geek squad to cover them up or the boundless number of other end runs or public employees assigned to the “problem”.

            • John Konop says:

              The issue has a few more factors……you would have to factor the cost of people not be able to move from one part of the city to another via jobs, schools…..the cost side is more welfare, and or low wages. No dought the Marta model needs improvement……but, the USSR ignored the infrastructure issue during the Cold War and that was a key downfall issue, while we invested heavily……

              • mpierce says:

                1) Not sure how that relates to the claim “fares probably cover about 75% of the budget.”
                2) Infrastructure includes things other than MARTA
                3) Roads also allow people to get to jobs, schools, etc.

                • John Konop says:

                  Not getting your point? Never said Marta was the only project…..in fact I said the opposite numerous times…..Just pointing out that you have to consider other moving parts in a budget….obviously you get the issues with people not having cars living on the city, lack of income issues……

    • Dave Bearse says:

      Road users with long commutes being subsidized by SPLOSTs and property taxes isn’t enough, so its time to expand subsidation by extending it to state taxes.

  3. Jon Richards says:

    The question is whether federal regulations would still carry over to projects built with the replacement state tax. In order to qualify for federal money, states and local governments have to jump through hoops, and it’s said that the same project costs less when done by the state as opposed to the feds, and is cheaper still when it’s a local project as opposed to a state project.

    If so the net tax burden for road infrastructure could go down if the same projects were built with state money.

  4. Transportation policy should be viewed along a two axis grid, on one axis you have time either slow or fast and on the other axis you have fixed or variable. Think of public transit as slow/fixed, using rail or buses you have a slower commute but it’s fixed and you can plan your life around it. Think of things like HOT lanes as fast/fixed, same as rail but faster but also costs more, but it’s there if/when you need it. Regular car transport is a mixed bag, it can be inhabit slow or fast because it’s variable. No traffic? It’s fast and cheap. Lots of traffic – slow and cheap, but you’ve always got the HOT lane option. Of course only transit actually gets cars off the road, which improves the commute for everyone else, and that’s a fact that in my opinion isn’t acknowledged enough, of course when the state does stupid stuff like try to pass a T-SPLOST that doesn’t include I-20 extension for MARTA…

    • MattMD says:

      I’m pretty sure the T-SPLOST had an I-20 extension but it was BRT (Bus Rapid Transit) and it was then equated with normal bus routes (which isn’t true).

    • Engineer says:

      I don’t know if the people of GA would be willing to let people from other states get away with buying gas and not as much in taxes as we do. Plus, I don’t see GA, especially the crowd that were against a much less invasive TSPLOST, being ok with a much more invasive mileage tax and the additional oversight needed for a mileage-based tax (for example, convincing people to let the state keep track of their location via gps to make sure they don’t get taxed for out of state mileage, as was mentioned in the Oregon article). Otherwise, I don’t really have much of an opinion on it one way or the other, but it is another idea to toss into the pot.

      • Harry says:

        Good comments. Having lived in Oregon for 5 years in my early adult stage, it’s beautiful with nice people but speaking as a CPA who works with tax laws – they are far from ideal.

      • benevolus says:

        If a 1% difference in sales tax is enough to cause people to live in one place rather than another, I would think additional gas tax would serve to concentrate population even more than it is.

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