According to my friend Chris Edwards at the Cato Institute, 98% of American streets and highways are owned by states and local municipalities. Plans for rebuilding America’s infrastructure from the federal level seem misguided when faced with that fact. How on earth can it be more efficient to use an increased federal gasoline tax to rebuild infrastructure owned by local governments? The short answer is, it can’t be. Here, Chris explains some more about why any plan that raises the federal gas tax isn’t a great idea:
Revenues from the 18.4 cent-per-gallon federal gas tax go into the Highway Trust Fund, and then are dished out to the states. But 98 percent of U.S. streets and highways are owned by state and local governments, and the owners should do the funding. States that need to improve their highways can increase their own gas taxes, sales taxes, issue debt, add user charges, or pursue public-private partnerships.
There is no advantage in raising federal highway revenues rather than the states raising their own. The states can tackle their own infrastructure challenges, and about half of them have raised their transportation taxes in the past five years.
Supporters of a federal gas tax hike say that the tax has not been raised since 1993, and its real value has been eroded by inflation. That is true. But the federal gas tax rate more than quadrupled between 1983 and 1993 from 4 cents to 18.4 cents, as shown in the chart below. The 4-cent rate would be 9.8 cents in today’s dollars, so the real gas tax rate has risen substantially since the early 1980s.
The chart shows that the states have steadily raised their own gas taxes in recent years. API discusses state gas taxes here, and they emailed me data back to 1994. (I’ve interpolated a few missing years). The state average—currently 33 cents—includes both gasoline excise taxes and other taxes on gasoline.
I hope Trump does not go down the road of gas tax increases. Pumping more money through the federal bureaucracies would fuel more top-down planning and inefficiency. Funding for highways and other infrastructure should be handled by state and local governments and the private sector.
Read more here.
E.J. Smith - Your Survival Guy
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