Ranking the Sad Parade of Federal Transpo Funding Ideas From Worst to Best

The Highway Trust Fund is on a losing trajectory. But no one can agree on how to fix it. Image: Congressional Budget Office via America 2050
America’s transportation funding system is broken, and no one in charge has good ideas about how to fix it.

The problem seems simple enough: The federal transportation program is going broke because Washington has allowed the gas tax to be eroded by inflation for more than 20 years.

As obvious as raising the gas tax may be, America’s political leaders won’t touch it. Yesterday, The Hill reported that Congressman Bill Shuster, chair of the Transportation and Infrastructure Committee, is ruling out a gas tax increase or any additional fees on driving to fund transportation.

Apparently, anything that might make driving a little more expensive is no longer politically palatable. Instead, President Obama and members of Congress have trotted out a series of proposals that range from one-off gimmicks to total fantasies that wouldn’t solve anything.

It can be hard to keep them all straight, so here’s our ranking of ideas to fix federal transportation funding, from worst to best.

Eliminating Federal Funding for Biking, Walking, and Transit

We hesitate to even call it an “idea to fix federal transportation funding,” but at the bottom of the pile is this stinker from the Koch brothers contingent. It has gone over like a lead balloon in Congress twice, but it satisfies the urges of the far-right wing of the Republican Party.

Abruptly eliminating federal transit funding would be catastrophic for transit agencies and city economies nationwide. A variant on this idea — eliminating federal support for biking and walking only — would not even come close to fixing the Highway Trust Fund, but it would cut off funding for projects that reduce congestion and improve safety. The federal government currently spends under a billion dollars per year on walking and biking, or less than 2 percent of its transportation spending.

GRADE: F

Royalties From Increased Oil Drilling

House Republicans tried this in 2011 — another ideological fantasy masquerading as a policy solution. The proposal would have directed the Secretary of the Interior to increase offshore oil drilling and pump the added royalties into transportation. Since those royalties wouldn’t materialize for a few years, if at all, Erich Zimmermann of Taxpayers for Common Sense pointed out that the plan would actually cost the government upfront. “Sounds like a recipe for doubling down on our current deficit mess,” he said.

Not to mention the fact that increased fossil fuel extraction would only lead to more driving and the creation of a more expensive transportation system with more highway miles to maintain. Unsustainable on multiple levels.

GRADE: F

Pension Smoothing

This idea actually had some political legs about a year ago. It would work like this: Allowing corporations to short change their pension funds in the near term would generate additional taxable income, with the proceeds diverted to transportation spending.

The Bipartisan Policy Center noted that this strategy doesn’t actually raise money, while making it more likely that taxpayers will end up providing emergency retirement support to desperate seniors.

GRADE: D-

Cuts to the Postal Service

A GOP plan floated in the last round of transportation bill negotiations would have generated $10 billion over 10 years by cutting delivery of mail on Saturdays. Since the Highway Trust Fund is expected to rack up a deficit of $167 billion over the next 17 years, that wouldn’t exactly balance the books, without even wading into the question of whether transportation funding should be linked to levels of postal service delivery.

GRADE: D

Overseas Tax Holiday

This plan was floated by the oddball coalition of Nancy Pelosi and Rand Paul. The idea is that some of the $2 trillion in U.S. corporate profits hiding out overseas would return to the U.S. if the tax rate were lower than the current 35 percent. Paul’s proposal would temporarily lower the rate to 5 percent for companies repatriating their profits.

The problem? Well, there are many, but you could start with the fact that it would only increase the incentive for corporations to stash profits overseas in the future, as they await the next “tax holiday.”

And, of course, this idea is completely divorced from the transportation system itself. That hasn’t stopped Shuster from saying it’s his favorite strategy for the current reauthorization effort.

GRADE: D

Continue to Bail Out the Highway Trust Fund With General Fund Money

This “plan” seems to be one of the more politically feasible ones. After all, it’s the one lawmakers have opted for the last five times the HTF ran out of money, and it closely resembles doing nothing. But it has some distinct disadvantages.

More than $50 billion has been dumped into the HTF from general fund revenues since 2008. And according to yesterday’s report from The Hill, lawmakers are preparing for the possibility of another bailout very soon.

That means Washington is ready to continue diverting money from other important public priorities like education and healthcare. The longer Congress drags its feet, the bigger the cost will be.

GRADE: C-

Obama’s Overseas Business Tax

Obama’s recent proposal for shoring up transportation funding sounds pretty similar to Pelosi and Paul’s. But instead of relying on a one-time tax break, Obama would institute a one-time tax on overseas profits. Politically, it seems to be going nowhere, and like all of the proposals with lower grades, it has nothing to do with transportation and won’t provide any long-term solution. But it would avoid some of the perverse incentives in other proposals, and it’s not as silly as the postal service idea.

GRADE: C

Instituting a Mileage Fee

Assessing a fee based on miles driven eliminates some of the problems with the gas tax: Namely, increasing efficiency of vehicles is gradually eroding its usefulness.

While there are some mileage fee pilot programs in place, it doesn’t seem ready for prime time yet. No one has quite figured out how to assess and collect a mileage charge.

GRADE: B+

Raising the Gas Tax

The obvious choice is the best choice. Take away the ridiculous politics, and raising the gas tax is simply the most common-sense way to fund transportation. With gas prices having just fallen so steeply, the effect at the pump would barely register with drivers. Lawmakers still can’t muster the courage to touch it.

There was a proposal from Oregon Congressman Earl Blumenauer to raise the gas tax 15 cents per gallon over three years, but it went nowhere. While many states have raised their gas taxes and those lawmakers have been overwhelmingly reelected, no such fortitude exists at the federal level.

Grade: A

So what’s actually going to happen? According to The Hill, lawmakers are most likely to pursue the Pelosi/Paul repatriation idea or another extension paid for with general funds. The Hill’s Keith Lang reports the lawmakers are already discussing the possibility of an extension because, as Shuster said, tax reform proposals take a long time. The Highway Trust Fund is heading for another bailout by May 31.

  • Robbie

    I’ll agree that a gas tax increase in the short term would help the fund. However, your grading seems to contradict itself. The goal should be to help the fund in the long term, but you guys give a better grade to a short term fix (raising the gas tax, which will only help if fuel efficiency does not increase) than a long term fix (taxing mileage).

  • com63

    How about a gas tax increase that is indexed to inflation and also somehow tied to overall energy efficiency standards. As vehicles get efficient, the tax per gallon goes up.

    If electric cars actually become a big part of what is on the road, there will be a need to capture revenue from those drivers as well through some other means. The mileage fee would have some additional traction in that case.

  • The fun part is arguing with people who think that drivers entirely pay for themselves and roads and parking aren’t funded from general revenue, “cause of the gas tax”.

  • Jake Wegmann

    Sometimes it’s fun, and sometimes it’s just exhausting! But we’ve gotta keep doing it over, and over, and over again, because the perception that you mention is so deeply ingrained.

    Now if we could get the Tea Party types to recognize that highway spending is the closest thing we have to actual socialism in this country? Now THAT would be a breakthrough.

  • Southeasterner

    I think you missed the primary suggestion coming from the Tea Party. Devolution.Why increase revenue when you shouldn’t have any expenditures in the first place?

    As horrible as it sounds maybe we need to re-think our opposition. Given = where gas is purchased (urban areas) vs. where gas tax revenue is primary spent (rural highways) it would be a huge reduction in revenue for some states (mostly rural and red) but a potential boom for other states that actually care about urban transportation.

    The risk of course is for those of us living in urban environments in states with DOTs controlled/held hostage by a republican governor and/or legislature. I’m thinking Seattle, Milwaukee, Chicago, Detroit, Baltimore, Pittsburg, Philadelphia. But you never know, crazy things happen like the support and funding of transit by DOTs in very red states like Utah and Arizona.

    Anyway I think it’s worth evaluating/ranking.

  • Southeasterner

    For the record this is a ridiculous idea and goes against any basic idea of maximizing consumer surplus.

  • Kevin Love

    I note that in Canada the federal government provides approximately zero highway funding. Their constitution says roads are a provincial responsibility. As a result, cities like Vancouver have zero expressways.

  • mx

    Taxing mileage is deeply problematic. It’s either too susceptible to fraud and/or involves massive government tracking of everybody’s movements. The administration costs are huge; suddenly everybody has to worry about their own gas tax filing instead of it just happening automatically at the pump.

    Far better would be to do a one-time increase in the gas tax and then peg the rate automatically to inflation and the US fleetwide car/light truck fuel efficiency figures. This also has the nice effect of providing a further incentive to drive more fuel efficient vehicles.

    At some point, if electric cars become popular enough that we’re no longer subsidizing them, we’ll have to look at how their drivers will contribute to the Highway Trust Fund, but that’s kind of a silly thought today when we’re already spending many thousands to encourage their purchase.

  • Bobberooni

    Agreed, ridiculous. Need I point out that most of the freight and passengers on those rural Interestates — especially fright — are headed to or otherwise support the cities in the region?

  • Bobberooni

    Gas tax is good because it encourages efficiency. In that way, it’s like a carbon tax-and-dividend, which is good for the same reason. If overall efficiency rises, you just increase the gas tax again to keep revenues level. You also need to increase it for inflation, of course.

  • Bobberooni

    Why can’t we have politicians who can just increase the tax as needed due to inflation and efficiency gains, rather than trying to set it on permanent auto-pilot today?

  • Don’t forget the idea of implementing a land value tax.

  • Bicycle_Boy

    What is “consumer surplus”?

  • Bicycle_Boy

    The Gas Tax is also more of a “user fee” where the people doing the most driving pay most of the tax, whereas taking money from the general fund just creates more pressure to cut other programs such as education and health care. . .

  • Eric Hesse

    VMT fee not as distant or difficult as many think. Oregon is leading the way, with a pilot program currently underway: http://www.myorego.org/

  • If we could get tea party folks to use rational thought it wouldn’t be the tea party. Sometimes I wonder how some of them dress themselves in the morning.

    But yes, by “fun”, I mean exhausting, frustrating, etc. *sigh*…was just trying to put a positive spin :P.

  • teo5

    agreed, there are lots of feasible options for doing a miles-traveled fee!

  • neroden

    The “repatriation” idea is better described as “treason on behalf of corporate executives”.

  • neroden

    Because most politicians have very little interest in good governance. Some do, but damn, it’s hard to get them. Has there ever been a single one from Louisiana, for example?

  • TomD

    Recording everybody’s mileage, which you call “massive government tracking of everybody’s movements,” is ALREADY being done, in New York, anyway.

    In New York, cars must be inspected every 12 months. When you bring your car in, your odometer mileage is recorded and sent to Albany (where, presumably, it is checked for rollbacks).

    If government wants to track everybody’s movements, they can do it today with license plate readers and toll transponders. Reporting annual mileage numbers is much less intrusive than these other EXISTING tracking technologies.

  • Agreed. Minor correction: OReGO is not a pilot program. ODOT has already completed two pilot programs. What it is is a ‘voluntary’ program limited to 5,000 motorists who will pay 1.5-cents per mile driven within the state and have their state gas tax of 31.07-cents per gallon refunded.
    http://www.planetizen.com/node/74756

  • How is highway (or transit) spending socialism? In theory, the “pay-as-you-go” principle established I believe in the 50’s with the Interstate Highway Act meant that the gas tax would finance highway spending.

    In 1982, under Pres. Reagan, the highway spending funded from the gas tax was broadened to include transit.

    I think the socialism aspect is not in the highway spending but in the highway driving – that the roads would be “free” as opposed to tolled, like the state toll roads that flourished prior to the 1956 Highway Act.

  • Jake Wegmann

    I could see the merits of “welfare” rather than “socialism” to describe what’s going on. But either term flies in the face of the idea, still clung to by so many, that highway capital spending is an emblem of rugged individualism and capitalism while public transit represents the opposite.

    If what you just said about the $70bb in general fund spending on highways since 2008 were common knowledge, the general discourse could begin to change. So we need to hammer that point over and over again, and to do so, I’m more than willing to use inflammatory terms like “socialism.” Because you know that the other side is perfectly willing, and has been perfectly willing, to be not only inflammatory but deceitful.

  • This morning I heard about a poll on how to finance the repair of California’s degrading road infrastructure. Any guesses as to which came out tops?

    “…when asked about three ways to
    increase state funding for this purpose, most Californians did not favor any of them. Just 18 percent favor increasing the state’s gas tax, 23 percent favor increasing the vehicle registration fee, and 47 percent
    favor issuing bonds paid for through the state’s general fund.”

    http://www.ppic.org/main/pressrelease.asp?i=1724

  • Jake Wegmann

    I guess general fund. Because “other people” are paying for it, right?!

  • I thought ‘welfare’ was more inflammatory than socialism :-). Politicians, esp. conservatives, like to blame societal woes on those “who get something for nothing” and don’t work, or that is their perception. E.g., food stamps. When you throw-out the user fee principle for roads, then roads have to eat from the same trough as public education, safety, and use, welfare.

    The major difference between those other functions and roads is that one has its own trust fund – dedicated to roads. But pols are so terrified of raising it, i.e., the gas tax, that they prefer to compete with other government expenditures that have no trust fund.

    That PPIC poll is a perfect example explaining why they do so

    Sad!

  • Jake Wegmann

    Agreed 100%. Here in Texas, today, we had the sad spectacle of a protest by self-identified conservatives against toll roads. In the same breath they call for state DOT highway spending to be doubled or tripled.

    So much for the “user pays” principle!

  • polopoint

    “The obvious choice is the best choice” – Agreed. It is the most obvious and it is the best and easiest and most immediately ready. Then let the states do it. Let each state raise their own gas tax for their own needs and quit groveling and mooching at the federal magical honey pot looking for handouts.

    There. Done. That was easy.

  • polopoint

    Don’t we already have those?

  • polopoint

    Then they are subsidizing trucking companies for freight that could be on already ready rails?

  • polopoint

    really.

  • polopoint

    Because you just can’t get politicians that ‘can just increase the tax as needed’. Better to index the tax to save the gutless pols the need to stand for something and the gimme, gimme, gimme electorate that thinks they shouldn’t have to pay for such & such cuz govt should.

ALSO ON STREETSBLOG

Is Raising the Gas Tax Really the Answer?

|
Cross-posted from the Frontier Group … In the 1920s, Great Britain debated the future of its Road Fund – a pot of money raised from vehicle excise taxes and devoted exclusively to road repair. Then-Chancellor of the Exchequer Winston Churchill opposed the fund, arguing that, if drivers paid taxes dedicated solely to roads, “It will be only […]

Obama’s New Transportation Budget: The Good, the Bad, and the Ugly

|
With federal transportation funding on track to run dry by May 31, Washington lawmakers are gearing up again to reset national transportation policy… or, if that doesn’t work out, to limp along indefinitely under the status quo. Today President Obama unveiled his opening bid in this process. The $478-billion, six-year plan from the White House includes many […]

Six Lies the GOP Is Telling About the House Transportation Bill

|
The transportation-plus-drilling bill that John Boehner and company are trying to ram through the House is an attack on transit riders, pedestrians, cyclists, city dwellers, and every American who can’t afford to drive everywhere. Under this bill, all the dedicated federal funding streams for transit, biking, and walking would disappear, leading to widespread service cuts […]

Streetsies 2011: The Final Installment

|
Tomorrow is the last day of 2011, folks. I wish you a Happier New Year than this one was. We’ve spent the last couple days looking back at some of the bests and worsts of 2011. A brief recap: The hit to transit budgets was the low point of the year, with the high point […]