Taxing for Highways, Paying for Bike Lanes

Before Congress raises the gas tax, it should make the Highway Trust Fund more about fixing highways. by Mac Zimmerman, May 25, 2015 6:11 p.m. ET

You’d think that after the phrase “bridge to nowhere” became synonymous with Washington’s waste and excess, lawmakers would avoid anything reminiscent of that misbegotten spending project in Alaska. But now we have the “Bridge to Sustainable Infrastructure Act,” which is nowhere near as worthwhile as its bipartisan sponsors in the House would like Americans to think.

For one, the bill increases the federal gasoline tax at a time when Americans have only begun to enjoy a bit of relief at the gasoline pump. What it doesn’t do is streamline a Byzantine regulatory process that makes repairing roads and bridges more expensive, or fix fundamental problems in the way federal infrastructure funds are disbursed.

The bill is meant to address the impending insolvency of the Highway Trust Fund, whose problems are, admittedly, pressing. The fund—which provides roughly a third of the nation’s financing for road repairs and construction—has been losing money for years. It will likely be empty by July, though Congress may soon pass a bill that refills it for an additional two months.

Enter the gas tax hike bill’s authors, led by Reps. Jim Renacci (R., Ohio), Bill Pascrell (D., N.J.), Reid Ribble (R., Wis.), and Dan Lipinski (D., Ill.). Their proposal indexes gas taxes to inflation, all but guaranteeing annual tax increases. It also provides for additional and more dramatic gas tax hikes—potentially reaching as high as 42%—if Congress does nothing else to refill the Highway Trust Fund’s expected $168 billion shortfall.

But before considering any policy that would raise additional revenue, Congress should first reform where the fund’s money goes. The Highway Trust Fund now pays for a plethora of projects that have little to do with highways. According to a 2013 analysis by the Heritage Foundation, at least 20% of gas-tax revenues in recent years went toward other programs, from light rail to bike lanes to landscaping projects. Some funds even went toward establishing transportation museums.

Hence the financial problems. According to an editorial in this newspaper, spending on non-highway projects has increased by nearly 40% since 2008, while highway-related spending has remained flat. If Congress directed the fund to spend its money only on highways and other road-related infrastructure—what it was initially created to do—it would be 98% solvent for the next decade.

Streamlining the planning process could also save taxpayers time and money. For example, a 2011 Congressional Research Service study estimated that major Federal Highway Administration projects can require up to 200 regulatory steps and take between nine and 19 years to complete—with planning, design and federal environmental reviews consuming up to half of that time. Even small projects can take between four and six years from start to finish.

Reforming these rules would reallocate tax dollars wasted on paperwork and red tape to investments in asphalt and concrete. Furthermore, it could save Americans from the pain of a gas tax hike. According to Sentier Research, the median family income is still $900—or 1.7%—lower than it was six years ago. Fortunately, falling gas prices have offset some of this difference. Average prices per gallon have dropped by more than a dollar over the past year, leading to projected annual savings of $700 per household.

Any increase in gas taxes, big or small, would cut into this relief at the pump. Those in the middle class in particular would feel the pain, as they devote the highest share of their household spending to gasoline.

Higher gas prices, tax-induced or otherwise, also correspond with diminished economic growth. When you and I have more money to spend, we usually do so, benefiting the economy in the process. Financial analysts at Goldman Sachs GS 1.39 % predict that lower gas prices could add as much as half a percentage point to GDP growth this year. Some of this will be offset by corresponding declines in the oil and gas industry, but the overall effect on America’s economy is still expected to be positive in 2015.

This puts in perspective the first quarter’s lackluster 0.2% economic growth. Without the benefits of lower gas prices, growth could have been even slower, which is the last thing Americans need. When the Highway Trust Fund’s future comes up for congressional debate in the coming weeks, legislators should consider reforming it rather than simply demanding that you and I pay more at the pump.

 

Source: WSJ, Mr. Zimmerman is the policy director at Americans for Prosperity. Subject: Taxing for Highways, Paying for Bike Lanes, WSJ, 5.25.15