Wednesday, November 25, 2009

Feds Contemplating Raising Gas Tax To Fund Infrastructure

While this Star Ledger report is focused on funding the ARC Tunnel that would add capacity on the Northeast Corridor and NJ Transit, the problem is that the federal government is chasing after money from a declining revenue source. They're looking to raise revenues sufficient to cover mass transit and other transportation projects by raising the gas tax.
Both state and federal taxes — which combined add 32.9 cents to the per-gallon price — haven't been raised in about two decades.

Rep. James Oberstar, D-Minn., a leading voice on transportation issues, wants a six-year, $550 billion federal transportation program that would include a 5-cent federal gas tax increase.

The 18.4-cent-per-gallon federal gas tax, which hasn't been raised since 1993, provides most of the money for projects that benefit from the program.

Oberstar, who is chairman of the House Transportation and Infrastructure Committee, has said funding for the six-year program will fall about $140 billion short if the federal gas tax remains the same.

"The maintenance and improvement of our transportation infrastructure has fallen well behind our needs," Oberstar said. "An increase in the tax that funds these projects is long overdue."

Rep. Bill Pascrell Jr., D-Paterson, said the federal government should have acted quicker to address New Jersey's transportation needs so it wouldn't be forced to raise taxes during a recession.
As cars become more efficient, they use less gas, so over time revenues will decline even if there are more cars on the road and are even going further on a tank of gas.

That's why there's so much talk about shifting to a mileage tax, which addresses the need of providing funding for roads and bridges based on actual usage, rather than the indirect method of taxing motor vehicles. There's also been a resurgence in toll roads, which directly charge based on mileage used. Indeed, one of the goals cited in raising the motor fuels tax is to spur people to move to more efficient vehicles to avoid higher energy costs at the pump.

Not only are more efficient cars cheaper to operate over the life of the vehicle, but they result in fewer tax dollars going to state and federal transportation funds. The choice then is to either raise the same motor fuels taxes, or seek alternative funding sources.

At a time when gas prices are low, such talk is likely to move a whole lot further than if prices spike once again. In fact, if prices spike, we've seen evidence that motor fuel consumption declines and with it tax revenues. That's why chasing motor fuel tax revenues is a losing proposition.

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