Raising the Gas Tax Makes (Dollars and) Sense

So I'm flipping through the new Rolling Stone issue when I come across this random quote from actor/comedian Joel McHale, who stars in NBC's "Community" and also hosts "The Soup" on E! Network: "It's so crazy that we can't fix our roads and bridges. A first-world country is defined by more than just really good restaurants."

Even Joel McHale gets it! Our transportation infrastructure, most of which was built more than 50 years ago, has reached the breaking point. If we want to make travel safer, ease congrestion and move goods faster -- and everyone seems to agree that we do -- then now is the time to invest in our country's transportation infrastructure. Make no mistake, it's going to take a massive infusion of money to fix our deteriorating roads and bridges, modernize our ports and airports, expand railways and public transit, and enhance sustainability in our communities.

With the transportation system we have is stretched beyond capacity at current population levels, how are we going to pay for the enhanced system that we need? In terms of federal funding, there's just not enough of it to get the job done. You see, the government relies mainly on revenues collected from the tax we all pay at the pump -- 18.4 cents per gallon. That rate hasn't been raised since 1993, so inflation has sharply reduced the buying power of the fuel fee. As I've said before, Congress really needs to raise the federal gas tax.

Because this hasn't happened, some states have raised their own rates response. But the Institute on Taxation and Economic Policy, in its new report Building a Better Gas Tax, suggests that state gas tax revenues are still not high enough to avoid being eaten away by inflation. The main finding is that 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. 

This first of its kind, 50-state report reveals that state governments are losing out on over $10 billion in transportation revenue every year, contributing to an estimated $130 billion drain on the economy resulting from higher vehicle repair costs and travel time delays. The report offers three policy recommendations for modernizing state gas taxes:

  1. Increase gas tax rates to (at least) reverse their long term declines.
  2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects.
  3. Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform.

Kudos to the Institute on Taxation and Economic Policy for its tough but honest assessment of state gas taxes. Let's hope governors have more courage than the politicians in Washington to take the necessary steps to ensure a true 21st century transportation system for America.