February 2015

Don’t Raise the Federal Gas Tax Either!

By Amy K. Frantz

Falling gas and diesel fuel prices have spurred many elected officials in Iowa to declare it is time to raise the state fuel tax.  Now, elected officials of the federal government are joining the cry to raise federal fuel taxes as well.  They claim that with such low gas prices, consumers won’t be as burdened with an increase in the fuel tax.  I doubt, though, that if gas prices rise back to the levels seen earlier last year the powers that be will suspend those tax increases!

A three-cent federal fuel tax was first imposed in 1956 to build the interstate highway system.  Currently, the federal tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon for diesel fuel, with that tax revenue going to the Highway Trust Fund (HTF).  “For more than 50 years after Congress created the Highway Trust Fund in 1956 it was able to avoid a shortage of funds by a simple measure: it didn’t spend more than was collected in gas taxes.  That changed in 2008, when tax revenues declined due to the financial crisis but Congress continued to spend as if the revenues were growing.”[1]  Congress has made up the difference by transferring $55 billion from the general fund to the Highway Trust Fund since 2008.[2]  But spending more than you are taking in isn’t a revenue problem to be solved by hiking taxes.  It is a spending problem, pure and simple!

As in Iowa, the feds are using similar arguments in favor of the fuel tax hike – that we simply must repair all of those deficient bridges and roads before people die!  However, the data doesn’t support these over-dramatic arguments.  “Federal Highway Administration (FHWA) data show that of the nation’s 600,000 bridges, the share that is “structurally deficient” has fallen from 22 percent in 1992 to 10 percent in 2013.”[3]  Randal O’Toole of Cato Institute also indicates that “recent bridge collapses in Minnesota and Washington weren’t due to inadequate maintenance.  One fell due to a construction error that maintenance could not have detected or fixed; the other fell because an oversized truck illegally tried to cross the bridge.  Increasing federal gas taxes could not have prevented these or other recent highway problems.”[4]

Aside from the problem of how much is being spent is the issue of what the Highway Trust Funds are being spent on.  The Highway Trust Fund, as with the fuel tax in our own state, was established with the idea that these fuel taxes would be a “user fee,” that those who use the roads and bridges would be the same ones paying for their construction and upkeep.  After all, “highway” is right there in the name – Highway Trust Fund.  However, the feds have taken the revenue from the Highway Trust Fund and spent it on many non-highway projects.  “Drivers now see about a quarter of their gas taxes diverted to subsidize mass transit in merely six metro areas and sundry other programs for street cars, ferries, sidewalks, bike lanes, hiking trails, urban planning and even landscaping nationwide.  Trolley riders, et al., contribute nothing to the HTF.”[5]

“Federal spending on such side projects has increased 38% since 2008, while highway spending is flat.”[6]  At the same time that Congress and the President were taking $55 billion from the general fund to transfer to the Highway Trust Fund, they were spending more and more of the Highway Trust Fund on non-highway projects.  “Here’s what the politicians won’t say: Simply using the taxes that are supposed to pay for highways to, well, pay for highways makes the HTF 98% solvent for the next decade, no tax increase necessary.”[7]

Street cars and hiking trails and bike lanes might be nice, but not at the expense of maintaining our highways and bridges, the very items the Highway Trust Fund was established to fund.  The problem isn’t that the federal government does not have enough revenue for highways; it’s that they cannot seem to prioritize the revenue they have.  If the bridges are such a danger, they should be fixed first, not after we build a hiking trail or some sidewalks.  If funding formulas need to be changed in order to spend those funds on highways and bridges, then do it.  Do not come to the taxpayers with your hand out, expecting us to bail out your overspending and lack of prioritizing once again!

Amy K. Frantz is Vice President of Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.

[1] Randal O’Toole, “Five Reasons Not to Raise the Gas Tax,” Cato Institute Commentary, July 3, 2014, <http://www.cato.org/publications/commentary/five-reasons-not-raise-gas-tax> accessed January 16, 2015.

[2] Ibid.

[3] Chris Edwards, “Highways and the Federal Gas Tax,” Cato at Liberty, January 10, 2015, <http://www.cato.org/blog/highways-federal-gas-tax> accessed January 16, 2015.

[4] Randal O’Toole.

[5] “Abolish the Gas Tax,” The Wall Street Journal, Editorial, January 14, 2015.

[6] Ibid.

[7] Ibid.