Empty Tank, Empty Promises: Raising the Gas Tax Takes Guts

The local headlines have been blunt and brutal. "Miles short on transportation," read one a few days ago. "Empty promises" was today's title. Both of these blistering editorials by the Washington Post point out how little Virginia Gov. Bob McDonnell's transportation agenda would accomplish because of his reluctance to face the state's most urgent problem: its crippling shortfall of infrastructure funding. Without bold action, Virginia's crumbling network of roads, rails and bridges is likely to keep deteriorating as congestion mounts.

Some scathing excerpts from the first editorial on Jan. 22:

"The governor's inability, or willingness, to deliver major, ongoing new funding for transportation, despite the extravagant promises he made as a candidate, is a major failure, one that is likely to haunt Virginia for years."


"The governor has repeatedly acknowledged the scale of the state's problem. He knows that Virginia will soon have no money to spend on new construction, since all available funding will be siphoned off just to maintain infrastructure."


"At the heart of the problem are the anti-tax ideologues who dominate the Republican Party. The governor could have made an honest argument that indexing the gas tax -- which would simply enable the state to keep pace with costs, and stop decades of bleeding -- is not a tax increase. In the end, he opted out of the fight and punted on the state's most pressing challenge."

The editorial today spares no punches either for the governor who pledged "to get Virginia moving again." It concludes:

"Finding that revenue would have required bold strides, but Mr. McDonnel has offered baby steps. Measured against his own promises, his program is a bust. Perhaps a future executive in Richmond, Repubiclan or Democrat, will take his or her cues from the gutsiest governors in Michigan and Iowa."

The editorial is referring to Michigan Gov. Rick Snyder (also a Republican like McDonnel) who is seeking a major tax increase -- $1.4 billion a year -- to cover the state's massive infrastructure needs, and fellow Republican governor in Iowa, Terry Branstad, who is leading the charge on legislation to boost his state's gas tax to fund transportation.

Look, I'm not trying to pick on Virginia's governor. Governors in every state are trying to figure how to deal with the infrastructure fiscal crunch. The transportation crisis all across the country is severe, if little understood by most Americans. Consider the sobering statistics:

  • The American Society of Civil Engineers has estimated that an investment of $1.7 trillion is needed between now and 2020 to rebuild our infrastructure.
  • The Urban Institute puts the price tag at $2 trillion.
  • A 2010 report by 80 experts led by former transportation secretaries called for an annual investment of $262 billion.

Funding for transportation comes mostly from the federal government's tax on fuel purchases at the pump. That gas tax is 18.4 cents per gallon -- a woefully low amount considering that rate was set in 1993 and over the years rising inflation and infrastructure construction costs have eaten away the revenue. And as our fleet of cars and trucks becomes more fuel efficient, less frequent fill-ups will mean less tax money collected. 

Economists, policy experts and advocates all agree that raising the federal gas tax is a no-brainer. Perhaps it's a lack of brains (or more likely courage) that has prevented politicians in Washington, D.C. from taking that common-sense step despite widespread acknowledgement in both political parties that more transportation dollars are desperately needed. Even President Obama won't touch the gas tax, as noted by Politico:

Obama’s refusal to raise the gas tax, in spite of criticism from former House T&I Chairman Jim Oberstar (D-Minn.), made it into a New Yorker profile of the commander in chief written by Ryan Lizza. "He also could be ruthless toward members of his party in Congress. When he was informed in a memo that Rep. Jim Oberstar, a Minnesota Democrat, wanted to write a highway bill that included $115 billion more in spending than Obama had proposed, and which would be funded by a gas-tax increase, Obama wrote ‘No,’ and underlined it."

As I've said before, you really gotta learn to love the gas tax. But if our federal leaders fail to take appropriate action, then the states must tackle their infrastructure funding shortfall on their own. Raising their own gas taxes is one option to consider.

Recently, the smart folks over at the Institute on Taxation and Economic Policy issued a report called Building a Better Gas Tax. The study suggests that current state gas tax revenues are simply not high enough. In fact, after considering construction cost inflation, the average state’s gas tax is 6.8 cents lower today than the last time it was raised. If every state updated its gas tax rate to offset this decline, state revenues would be over $10 billion higher per year. Hence, the solution: Raise state gas taxes immediately to appropriate levels, index them to rising costs and inflation and offer tax credits to low-income families to avoid the regressive nature of gas taxes.  

Now comes supplemental data compiled by ITEP in the form of straightforward charts analyzing the full history of 26 states' gas tax rates, adjusted for inflation. (The other 24 states apparently do not publish sufficient historical data for charts to be made.) Take a look at these state gas tax charts. There's lots of interesting and surprising information contained in them, but the underlying point is that every one of the states levies its tax at a rate that is quite low by historical standards. In most states the charts are projected forward to 2021 in order to show what will happen to the gas taxes if things continue on their current course.  A number of states are on target to approach or surpass historic lows in just the next few years. These new charts provide an important long-term look at state gas taxes and provide a valuable way of analyzing the same inescapable problem.

The solution: gutsy governors willing to confront the infrastructure funding gap by raising the state gas tax.