Recently the Wall Street Journal ran a story about how the gasoline tax is becoming less and less relevant as a means of funding our highways:
For decades, the excise tax on gasoline and diesel fuel has been the main source of funds for building and maintaining the nation’s roadways. It has paid for most of the four million road miles currently in service. But now there is agreement across the political spectrum that the gas tax is broken and needs to be replaced, or at least overhauled. The problem is twofold: First, the tax has failed to keep up with the rising cost of highway construction and repair. And second, improved fuel economy and the rise of hybrid and electric vehicles means that more driving won’t be matched by higher gasoline sales, and that how much people pay for the roads won’t necessarily reflect how much they use them.
Wyoming legislators see things differently. As we reported recently, the interim joint revenue committee has suggested a ten-cent increase in the state’s gasoline tax to pay for highway maintenance. This increase would have serious consequences for the state’s economy. Wyoming families will have less money available for other expenses than gasoline, they will reduce their spending wherever they can and live on a tighter budget. Businesses will in turn respond by reducing their number of employees. With these consequences in mind, the gasoline tax could cost the Wyoming economy hundreds of private-sector jobs.
But while no one should disregard the macroeconomic effects of a hike in the gas tax, there is another aspect that is perhaps at least as important. In view of the long-term trend where gasoline taxes are losing their relevance, this looks like a feeble attempt by some of our state lawmakers to cling to their taxes and old-fashioned spending programs. Instead, there is an opportunity here for our political leaders to think creatively and seek out new, innovative solutions.
This does not mean tossing out the gasoline tax entirely. On the contrary, the original idea behind the tax is still sound and valid: to make those who use the highways pay for maintenance and improvements. But while the gas mileage did not change in our cars in the 1950s, ’60s and even the ’70s, there have been clear advancements since then. Car and truck engines are far more efficient today than they were only a quarter century ago. More and more cars come with six, seven or eight-speed transmissions to further enhance fuel economy. Even advances in tire technology have contributed to better MPG numbers. The increased use of electric engines to assist traditional combustion engines will take gas mileage to the next level.
The inevitable consequence of this is, of course, that we will consume less and less gasoline for the miles we drive. Therefore, it makes sense to seek out new funding sources for our highways. When considering those new sources, we should measure them against two criteria:
1. User-payer. Just as the gasoline tax has historically linked individual use of highways to individual payments toward highways, our replacement for the gasoline tax must concentrate the burden of paying for maintenance and improvements to those who use our highways.
2. Consumer choice and privacy. Another positive feature of the gasoline tax is that it has allowed the users of highways to pay for that use while remaining anonymous. The tax-collecting gasoline station does not put my name on the gas tax I pay when I fill up my car – they just collect the tax and ship it on to the government. Likewise, the gasoline tax has allowed me to respond to highway maintenance costs by regulating my driving: a high cost (i.e., a high tax) has given me the choice to drive less, which in turn has reduced maintenance costs.
One question that we cannot escape in this context is: what about tolling our interstates? This question is not new. Four years ago the Wyoming Department of Transportation presented a study that showed that it is indeed realistic to put tolls on Interstate 80 through Wyoming. Correctly designed, this toll system would meet both criteria put forward above, and allow the legislature to concentrate its highway funding reform efforts to the rest of the state’s highways.
No one in his right mind denies that we need more money for our highways. The problem is to find a sustainable funding model for the future based on free-market principles.