Eliminate the Federal Gas Tax

David Strom
Posted: Dec 04, 2007 12:54 PM
Eliminate the Federal Gas Tax

The 18.4 cents a gallon Federal gas tax is perhaps the single worst influence on the development of rational transportation policies in the United States, and it should be eliminated.

For many, even those on the right, those are fighting words. Gas taxes are usually portrayed as “user fees,” and there is no question that there is a legitimate Federal interest in fostering interstate commerce and ensuring a first-rate transportation infrastructure that serves as the backbone of our national economy.

Unfortunately, in today’s political climate gas taxes serve neither as legitimate “user fees” nor do they effectively serve to improve the overall efficiency and effectiveness of the movement of goods, services, and people. In fact, they often do just the opposite.

Everybody by now is familiar with the infamous “earmarks” that plague the appropriations process in Washington. In the latest transportation bill over 6000 earmarks diverted billions of dollars away from investments in basic infrastructure to the preferred projects of powerful Congressmen.

Here in Minnesota, about 40% of the Federal transportation funding was diverted to earmarks—usually reflecting the preferences of Congressman Jim Oberstar, whose seniority on the Appropriations committee gives him inordinate power to divert resources at whim.

And what do these earmarks fund? Nature trails, bike paths, welcome centers, and other such “pork-barrel” spending. One earmark even funded a program to make the Minneapolis-St. Paul airport more bicycle friendly! Is this how Federal gas tax dollars should be used?

But earmarks are not the only or even the worst result of Federal involvement in transportation decision-making. Federal dollars also come with strings attached, which effectively force states to divert resources away from pressing transportation needs. Without huge infusions of Federal matching funds it would have been unthinkable to sink hundreds of millions of dollars into underperforming rail transit systems, for instance.

State gasoline taxes themselves are not without significant problems, but at least the politicians are somewhat more likely to be responsive to their constituents’ concerns than the byzantine bureaucracies and Congressional Committees that now rule our fate.

Ideally, we need to gradually introduce market pricing mechanisms into the funding mix; not only would this lead to fewer distortions in the allocations of resources, but the market signals that prices provide are a far better way to help policymakers match supply and demand than the current blunt and often inaccurate guessing game that goes on today. A properly designed pricing system could not only help eliminate congestion today, but it could also send signals to transportation planners regarding exactly where new investments should be made to satisfy demand.

Current transportation planning comes from the top down. It is driven by politics, bureaucratic infighting, and the whims of policymakers and planners.

Instead, transportation policy and planning should be driven by one overriding goal: increasing the mobility of goods, services, and people with the maximum of efficiency using the scarce resources at our disposal. Markets, not planners and politicians, are best suited to achieving this goal.

Eliminating the Federal gas tax, and all the distortions it creates in the decision-making process, would be a great first step to putting citizens in control over how our transportation dollars are spent.