Here’s a familiar tale: Congress periodically runs out of money to pay for all the roads and highways and bridges it wants to fund. Historically, this money has largely come from the federal gas tax. But the gas tax hasn’t been raised in years and has since been eroded by inflation.
Congress keeps finding increasingly absurd ways to avoid raising the gas tax
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Sounds like an easy problem to solve, no? Just raise the gas tax! Have drivers pay for roads. Except... Congress doesn’t want to do that. Too controversial. So they keep devising ever-more byzantine methods of raising revenue instead.
This latest proposal might be their finest work yet. The Highway Trust Fund is scheduled run out of money at the end of July. So Sens. Barbara Boxer (D-CA) and Mitch McConnell (R-KY) have devised a new bill to raise roughly $48 billion to fund the next three years of federal highway spending. Since they refuse to raise the gas tax, they propose to do this instead:
- Raise $9 billion by selling off oil from the Strategic Petroleum Reserve (which was originally meant to be used to ease supply crunches in emergencies).
- Raise $16.3 billion by reducing the dividends that the Federal Reserve pays to certain banks.
- Raise $4 billion by indexing various custom fees to inflation.
- Raise $3.5 billion by increasing Transportation Security Administration fees.
- Raise $1.9 billion by extending certain guarantees on mortgage-backed securities.
- Raise $7.7 billion through tax compliance measures and other assorted policies. (One example: barring Social Security payments to individuals with felony warrants).
And so on. Weirdly, McConnell has been bragging that this bill “does not increase the deficit or raise taxes.” That’s... a stretch. The bill would plainly raise taxes on customs (for instance) by indexing current fees to inflation. McConnell just gets around that by calling them “fees” rather than “taxes.”
As Kevin Drum points out, you could solve much of the shortfall in highway funding once and for all by indexing the federal gasoline tax to inflation, so that it didn’t erode in value with each passing year. But for some reason that’s unacceptable, whereas indexing “fees” to inflation is perfectly fine.
So what’s next? Senate Democrats are currently stalling the 1,030-page highway bill so that they have time to read it. Meanwhile, the House GOP has its own version that would only replenish the Highway Trust Fund for the next six months while it figures out a longer-term solution (Congress is very fond of passing funding stopgaps while promising long-term solutions that never arrive).
Even if the Senate bill does pass, however, note that it will only fund highways for the next three years — but allocate spending for the next six. Which means that in 2018, we’ll be facing another shortfall and Congress will have to go rummaging through the couch cushions once more. Raising the gas tax would be the easiest way to avoid that. But very few people want to do that. So here we are.
Further reading
-- Note that right now would probably be the least painful moment to hike the gas tax. Oil prices have plummeted since last summer and gasoline is the cheapest it’s been in years.
-- Also note that the federal government accounts for just 27 percent of US transportation spending. The rest comes from states and localities. And states have figured out that raising the gas tax is a perfectly reasonable way to pay for roads. See, for instance, Maryland, Virginia, Pennsylvania, North Carolina, and Florida. Or, more recently, Georgia.
