Greater Greater Washington

Inflation, not bike sharing, is why the gas tax isn't enough

Congressman Eric Cantor (R-VA) recently railed against urban bike sharing, blaming it, pedestrian funding, and more for the gas tax not covering all transportation needs. But the real problem is that the gas tax is bringing in less revenue than in the past.

Virginia, Maryland, and DC are also raising record low amounts of revenue, adjusted for inflation, compared to almost any time in the history of their gas taxes.

Cantor says that federal bicycle and pedestrian funding in FY 2011 was around $1 billion. He claims that we spent $53 billion on highway and transit projects, which are the only types of transportation projects he considers appropriate. That means we spent 1.85% of our transportation budget on bikes and peds.

Unfortunately, the gap in our transportation budget is much larger than $1 billion.

The actual problem with the highway and transit trust funds is inflation. The federal gas tax was last raised in 1993. And since a penny buys less every year, so does the gas tax.

The federal motor fuel tax rate is currently 18.4¢ per gallon. That's the highest it's ever been in nominal dollars. But if we adjust for inflation, we see that in January 1994, 18.4¢ was worth 28¢ in 2011 dollars. That's a reduction of 34% in the value of the tax.

In actual buying power, the high point of the federal gas tax was in 1960. That year, the rate was just 4¢ (raised from 3¢ in 1959). But if we adjust for inflation, we find that 4¢ in 1960 is equal to 31¢ today.

In fact, at present we're on the cusp of dropping below the value of the gas tax when it was implemented in 1932. That year it was just one penny per gallon, which translates to 16.7¢ in today's dollars. That's not much less than the 18.4¢ we pay now.

In Cantor's home state, Virginia, the trend is even more stark. The gas tax is bringing in less money than at any time since the Commonwealth instituted the tax in 1923.

Back then, Virginia drivers had to pay a whopping 3¢ on each gallon of gasoline. But three pennies in 1923 is the equivalent of 40¢ today. That alone is more than today's Virginia and federal gas taxes combined, which add to 35.9¢/gallon.

Like the federal tax, the buying value of Virginia's state motor fuel tax has declined almost steadily since its peak in 1933, when it was at 87.8¢ in 2011 dollars (a nickel in 1933 dollars). It was last raised in 1987, when it went from 11¢ per gallon to 17.5¢ per gallon (raised from 22¢ to 35¢ in 2011 dollars). Due to inflation, Virginia's gas tax has lost 50% of its value over the last 24 years, and is now lower than ever before.

This is a difficult concept for many people to understand, at least in the abstract. That makes it easy for people to accidentally or purposefully mislead with figures. Consider the position of the Virginia Petroleum, Convenience and Grocery Association, the industry group representing many convenience stores in the state:

Whereas, In 1987, the first full year after Virginia's motor fuel taxes were last increased, the state collected $468 million. For 2009 motor fuel tax collections were $904 million, an increase of 93.1 percent; ... Now Therefore Be It Resolved, ... VPCGA opposes any effort to expand local motor fuel taxation, as well as any effort to increase the rate of the existing local taxes...
Did you see what VPCGA did there? They looked at the revenues from 1987 and the revenues from 2009 and compared them directly. But a 1987 dollar is not equivalent to a 2009 dollar. It is intellectually dishonest to suggest that tax collections increased by 93%.

If we adjust the 1987 gas tax revenue to 2009 dollars we can make a more valid comparison. $468 million in 1987 would be a touch over $872 million in 2009 dollars. That means that the 2009 revenue of $904 million is only a 3.67% increase over the 1987 revenue.

Another problem with gas tax revenues is the growth in Vehicle Miles Traveled (VMT). VMT growth is outstripping growth in gas tax revenues. This is due somewhat to an increase in gas mileage. In Virgina, VMT increased from 54.8 billion in 1987 to 80.9 billion in 2009. That's a VMT increase of 48%, while motor fuel tax revenues increased by less than 4% (inflation adjusted) over the same period. This means that people are driving a lot more without paying the correspondingly higher taxes that would be needed to keep the transportation system fully funded.

Like the rest of the country, Virginia is facing ever greater demand for all modes of transportation, but it has not raised the primary tax funding these programs in 24 years. And in fact, due to inflation, that tax's value has been dropping.

The other jurisdictions in the region face the same issues.

Maryland last raised its gas tax in 1992. It's been declining ever since in inflation-adjusted dollars. The current tax of 23.5¢ was worth 37¢ of 2011 buying power in 1993. The high point for Maryland's gas tax was in 1933, when the 4-penny tax was worth 70¢ in 2011 dollars.

The District just raised its gas tax by 3.5¢ to match Maryland's, from 20¢ to 23.5¢. DC hit its peak in 1955, when its 6¢ tax was worth 51¢ in 2011 dollars.

Raising taxes is a hard proposition for many politicians these days, but if we're going to keep our transportation infrastructure competitive then we need to find new revenues. The gas tax may be all or part of the solution, and it is overdue to be raised.

It's been over 700 days since the transportation bill (SAFETEA-LU) expired. It's been extended 7 times since then. It's now set to expire on the 30th of this month. If Congress lets the extension expire, the federal gas tax will stop. So will construction projects and grants all over the country.

We need a new bill, not just an extension. And this bill needs to be more progressive than the last one. We need a bill that encourages complete streets, recognizes the ability of livable communities to affect transportation demand, and one that gives states and regions more flexibility to decide the best course.

But the only way we'll be able to catch up on our decaying infrastructure and prepare for the future is to deal with the decline of the value of the gas tax. Now that Congress is back in session, it's time to deal with this mess.

If our elected officials do decide to raise the gas tax, one way to stop continued inflationary slide in its value would be to make it a sales tax rather than an excise tax. So, instead of charging a tax each gallon, the tax could be levied on each dollar spent on gasoline.

Whatever the solution is, it won't be found merely by cutting bikesharing programs, even if that does make a good soundbite in Mr. Cantor's district.

Matt Johnson has lived in the Washington area since 2007. He has a Master's in Planning from the University of Maryland and a BS in Public Policy from Georgia Tech. He lives in Greenbelt. He’s a member of the American Institute of Certified Planners. He is a contract employee of the Montgomery County Planning Department. His views are his own and do not represent the opinion of his employer. 

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Interesting, particularly for the stark state of virginia graph. Do you by any chance have any information/opinion on the impact of MPG or vehicular weight on the gas tax? I'd be most interested to hear about the impact of the gas tax (inflation adjusted) normalized to miles driven. I think different normalizations effect the different goals of gas tax, things like -- infrastructure maintainance, infrastructure improvements, environmental offset, the gov'ts impact in obtaining gas, etc.

by Ryan D on Sep 7, 2011 10:50 am • linkreport

Also, thank you for a good qualitative artical.

by Ryan D on Sep 7, 2011 10:54 am • linkreport

Brave numbers.

Of course, if inflation actually included energy prices it might be interesting.

The bigger point is we're talking very small increases. 10 or 15 cents on the state level would solve most of the problems. $1 -- bringing gas up to around $5/G would solve everything.

And we will be paying for $5 anyway - just a question of we tax ourselves or make the oil man rich.

by charlie on Sep 7, 2011 10:55 am • linkreport

*quantitative

by Ryan D on Sep 7, 2011 10:55 am • linkreport

Why is it an excise tax, anyway?

by Neil Flanagan on Sep 7, 2011 11:03 am • linkreport

Somehow NC has a 32.5¢/gal. gas tax and the difference is noticeable. Driving south on 95 from VA into NC there's a slight bump and the road smooths out significantly. I never appreciated the high tax while I was a resident but after moving my opinion has changed.

by Jacob M on Sep 7, 2011 11:04 am • linkreport

@ Neil Flanagan; I think for collection purposes. Easier to tax the producer than at point of sale. Obviously technology has changed that -- would not be hard to switch it to a more direct sales tax.

by charlie on Sep 7, 2011 11:15 am • linkreport

Cantor's inane argument that bicycle riders have something to do with highway funding shortfalls brings to mind this piece of ironic humor from post-Weimar Germany;

First man: The Jews are to blame for all of Germany's troubles today.
Second man. Yes, And the bicycle riders.
First man. Why the bicycle riders?
Second man. Why the Jews?

And so I ask mein kleine Eric, "why the bicycle riders?"

by Mike S. on Sep 7, 2011 11:16 am • linkreport

Highway and general road funding for construction and maintenance is a big problem. As your essay demonstrates the analysis of how much is needed is complicated.

A fair analysis would not only look at VMT but the damage to the roads due to the weight of vehicles. The increase in the weight of a vehicle damages the road by a factor of 4. That means that a truck that weighs twice as much does not twice the damage to the road but 16 times the damage.

What I'm getting at is that the formula should be reworked to include both VMT and weight. When the costs are apportioned, we will might/probably find that owners of cars are paying too much and truckers are paying too little.

If shippers had to pay the true costs for the roads, they may find that using alternative means (ie. railroads) to be more cost effective.

Alas, this issue will be demagogued to death and nothing will happen. The GOP will convince the general population that sidewalks are communist plot hatched in the basement of the Kremlin and unfunded sprawl (the American Way) is a right guaranteed by the constitution.

by tom on Sep 7, 2011 11:40 am • linkreport

@tom; between extra taxes on license plates, registration, the federal heavy vehicle tax, trailer tax and what not truckers are being taxed. Oh, I forgot the tire tax. Perhaps they can be taxed more. Or more by states rather than the feds.

I've modelled personal gas tax, and I think we could live with $10/G gas for commuters. It would hurt, but it could be done. I can't imagine a world where truckers have to pay that much -- our economy would fall apart.

by charlie on Sep 7, 2011 11:58 am • linkreport

It would be helpful to be factual. And I'm not a fan of Congressman Cantor. However, I often read here how Rep. Cantor rails against bikes and bike sharing plans. Nonsense. He essentially mentioned it once in a broader statement context about spending. And yet the drumbeat here is that he keeps talking about it when that is not the case.

After all, whatever other failings he may have as an elected official, he did support the public-private partnership that is creating the amazing VIRGINIA CAPITAL TRAIL linking Williamsburg and Richmond.

It's nice to think at a time of national bankruptcy that we can spend on items a few think are great...but that's not realistic is it? nor is it helpful to attack others who simply disagree.

by Pelham1861 on Sep 7, 2011 12:13 pm • linkreport

@Pelham

It's not realistic because we're not bankrupt. Not even close.

by Alex B. on Sep 7, 2011 12:28 pm • linkreport

The solution is pretty simple. The tax should not be levied as a flat amount, but as a percentage of the gas price - just like virtually all other taxes are calculated as a percentage. Politicians could get away with it, by picking the percentage that would equate to the 18c that it is now. However, as gas prices go up (and they will) so will the income from the tax.

by Jasper on Sep 7, 2011 12:46 pm • linkreport

@Pelham1861:

I agree with Alex B. but if we're really bankrupt, how about cutting these items first, rather than the $1B - $2B we spend on bicycle/pedestrian infrastructure each year. I haven't seen Rep. Cantor advocate any of these.

1) Ending our $2 trillion involvement in endless tribal feuds in Iraq and Afghanistan.
2) Ending billions of dollars of tax loopholes for oil companies.
3) Ending billions of dollars of tax loopholes for hedge-fund managers (http://www.nytimes.com/2011/07/07/opinion/07kristof.html)
4) Ending hundreds of billions of dollars of farm subsidies.
5) Reducing the $650B we spend on defense each year (excluding the aforementioned endless Iraq/Afghanistan wars).

by Ben on Sep 7, 2011 12:51 pm • linkreport

@ Pelham1861:It's nice to think at a time of national bankruptcy that we can spend on items a few think are great...but that's not realistic is it?

Bankruptcy means you have spend more than you take in. Why is it that many politicians only look at the spending side, and refuse to look at the income side. Politicians like to make the (flawed) comparison of running the government budget like a family budget. Poor people, who spend more than they get in often take a second job to increase their income. Why do many politicians refuse to consider that option for the government?

Oh, and BTW, the deficit is composed half by the Bush tax cuts, another third by the wars in Afghanistan and Iraq. The last sixth stems from low tax intake due to the recession.

So, fixing the deficit should not be that hard.

by Jasper on Sep 7, 2011 12:55 pm • linkreport

Ryan D, I attempted to figure out the tax taking into account both inflation and improved mileage here. But finding actual fleet mileage by year is time intensive.

Jacob M, I've seen an opposite effect when driving into Louisiana.

Charlie, I don't know if out economy would fall apart, but freight would continue to move to rail, barge and boat as has been happening for the last couple of decades.

by David C on Sep 7, 2011 12:56 pm • linkreport

BEN - I'd agree with some of those cuts to be sure but I do believe our Federal budget is way over-extended or bankrupt. We could do away with the DOT...that would save a ton...return control to the states and get rid of a bloated and useless Federal bureaucracy.

Attack Cantor if you wish but I don't think when the Democrats controlled Congress...veto proof at that...that they did anything significant for bikers. However, many states and private business interests have done plenty. To make this an issue of one party over another is silly and false.

But again, why do you want the taxpayers to pay these costs...how about seeking funding from private enterprise or foundations? Considering such a small % of Americans actually own bikes or use the trails...it's actually rather arrogant to expect all to contribute for the few on something which is more luxury than necessary.

by Pelham1861 on Sep 7, 2011 1:01 pm • linkreport

He essentially mentioned it once in a broader statement context about spending. And yet the drumbeat here is that he keeps talking about it when that is not the case.

He actually does keep talking about it. Rep. Cantor recently (re?)launched YouCut, a federally-funded website urging people to vote via the Internet for specific programs that they would cut from the federal budget. Municipal bike-sharing program are front and center on the YouCut website, even though Cantor cannot seem to put a finger on exactly how much municipal bike-share programs cost the federal government and does not appear to have a basic understanding of how bike-sharing systems work. Unfortunately, but not surprisingly, there is no field for public input on the YouCut website.

by Scoot on Sep 7, 2011 1:01 pm • linkreport

Jasper - The Obama-Bush tax cuts were supported by both parties...as was the war. But, these are not the only causes of the deficit. Medicare and Social Security are trillions of dollars underfunded. That is also known as debt...so yes there is bankruptcy. It's nice to pass along theory as fact but fact is fact. You either increase revenues or you cut spending. You could tax more but that will solve little. The Obama-Bush tax cuts are really a small % of the deficit.

by Pelham1861 on Sep 7, 2011 1:05 pm • linkreport

Cantor supported the amazing Virginia Capital bike trails project. Somehow, this gorgeous bike trail is being completed with much public and private participation. As for the YouCut website...this is but one item mentioned. Input is provided...you call or write his office or you organize people to vote against him. That's pretty darned good public input if you ask me.

by Pelham1861 on Sep 7, 2011 1:09 pm • linkreport

The actual problem with the highway and transit trust funds is inflation. The federal gas tax was last raised in 1993.

That might be one problem. Another problem is that huge sums of the money paid by drivers in gas taxes are spent on mass transit and other "non-highway purposes" instead of being spent to build, repair and maintain roads.

by Bertie on Sep 7, 2011 1:15 pm • linkreport

@Pelham

I'd agree with some of those cuts to be sure but I do believe our Federal budget is way over-extended or bankrupt.

Bankruptcy is a very specific term - it is when a person/organization cannot repay their debts. We are not bankrupt. We are not broke. We, without a doubt, have the ability to repay our debts. We know this because the interest rates for US Government debt are incredibly low - people are willing to give the US Government money more or less for free because they know that we're good to pay them back. As a nation, our debt-to-GDP ratio is perfectly reasonable.

It's true that we have some long-term fiscal issues to deal with, almost all of which are related to healthcare. However, we are not bankrupt under any reasonable definition of the term. We have the financial ability to repay our debts.

by Alex B. on Sep 7, 2011 1:15 pm • linkreport

@Pelham1861:
"Attack Cantor if you wish but I don't think when the Democrats controlled Congress...veto proof at that...that they did anything significant for bikers. However, many states and private business interests have done plenty. To make this an issue of one party over another is silly and false."

This is complete BS. The Recovery Act, and specifically the TIGER grants funded dozens, perhaps hundreds of bicycle investments, including Capital Bikeshare. Additionally, when Democrats controlled Congress, they pased the $20 per month commuter tax credit. These are both pretty significant achievements.

----------------------------------------------------------
"But again, why do you want the taxpayers to pay these costs...how about seeking funding from private enterprise or foundations? Considering such a small % of Americans actually own bikes or use the trails...it's actually rather arrogant to expect all to contribute for the few on something which is more luxury than necessary."

----------------------------------------------------------

How many roads and highways are paid for by private enterprises or foundations? We only hold passenger rail and bicycle infrastructure to this standard. Additionally, it's pretty arrogant to expect all to contribute to rural highways in North and South Dakota and other rural states but we do so because we have a national transportation sytem.

by Ben on Sep 7, 2011 1:23 pm • linkreport

@AlexB; there is no such thing as bankruptcy in terms of a sovereign state. Your definition applies to a private entity or some other governmental entities. The word you are looking for is default. And we were very close to default of some kind -- one that would likely prioritize bond holders over other entities.

@DavidC; exactly. Just like in Europe. Wait a second...

by charlie on Sep 7, 2011 1:28 pm • linkreport

In an automobile-centric culture, any cent not going to roads seems like a swipe to motor vehicle operators and they react vociferously.

The fact is that transit in cities where you have the right conditions to support it, significantly reduces motor vehicle traffic making it better for people who do drive. DC and NYC are perfect examples of this. NYC couldn't function if it were reliant on motor vehicles for mobility. (Note that limited access roads/bridges into each city are exceptions to the "significantly reduces traffic" point.)

The gas tax would have to be about triple what it is just to cover road and maintenance issues, and maybe at least 6x to adequately address transit and biking in ways that can significantly support motor vehicle traffic reduction, and maybe 7x to adequately fund pedestrian retrofit.

That's not counting the military costs associated with maintaining access to oil, and the various environmental and health costs.

FWIW, David Engwicht, in _Reclaiming Our Towns from Traffic_ calls for excise taxes on driving in terms of how personally owned automobile based transport economically destabilizes transit systems.

by Richard Layman on Sep 7, 2011 1:32 pm • linkreport

Considering such a small % of Americans actually own bikes or use the trails...it's actually rather arrogant to expect all to contribute for the few on something which is more luxury than necessary.

About half of all Americans own and ride bikes, and 100 million people use trails (which aren't just for bikes). Furthermore, we often pay for things that only a few people will use. I doubt I will ever be rescued by the Coast Guard and neither will you, but I'm OK with funding their ability to rescue the few people who will ever use it. Etc... It's not arrogant, it's good policy. We're talking about a very small amount of money.

by David C on Sep 7, 2011 1:36 pm • linkreport

huge sums of the money paid by drivers in gas taxes are spent on mass transit and other "non-highway purposes" instead of being spent to build, repair and maintain roads.

USDOT estimates that about 85% of the money collected in gas taxes is spent to build, repair and maintain roads. The other 15% is spent to build, repair and maintain transit systems and other "non-highway projects" that have the uniquely positive effect of reducing traffic conditions for drivers, making roads safer for drivers, and lowering gas prices for drivers.

by Scoot on Sep 7, 2011 1:36 pm • linkreport

@Bertie
Another problem is that huge sums of the money paid by drivers in gas taxes are spent on mass transit and other "non-highway purposes" instead of being spent to build, repair and maintain roads.

I no doubt will regret even responding to you, but you are way off base here.

"Huge Sums... spent on mass transit" - it's 20% of the highway trust fund. And the FTA obligated around $10 billion (Table 1) in FY 2009 for transit but the congestion benefit of transit was over $18 billion (page 33) so I'd say it's a pretty good deal.

by MLD on Sep 7, 2011 1:36 pm • linkreport

Cantor also criticized Capital Bikeshare as soon as the funding was announced. He kept calling it a program to build bike racks in Georgetown which he knew was wrong (there's a word for that).

by David C on Sep 7, 2011 1:37 pm • linkreport

That might be one problem.

No. It most certainly IS a problem.

by David C on Sep 7, 2011 1:38 pm • linkreport

@Charlie

there is no such thing as bankruptcy in terms of a sovereign state. Your definition applies to a private entity or some other governmental entities. The word you are looking for is default. And we were very close to default of some kind -- one that would likely prioritize bond holders over other entities.

Call it default if you like.

You're right that we almost defaulted, but we did so because of our own political inability to solve an easily-solvable problem. We have plenty of ability to pay. All we needed was for Congress to flip a switch and then everything was fine. It was not an actual financial crisis, it was an entirely self-created political one.

Now, we may not want to pay, but that doesn't mean that we are bankrupt.

by Alex B. on Sep 7, 2011 1:41 pm • linkreport

MLD,

"Huge Sums... spent on mass transit" - it's 20% of the highway trust fund. And the FTA obligated around $10 billion (Table 1) in FY 2009 for transit but the congestion benefit of transit was over $18 billion (page 33) so I'd say it's a pretty good deal.

I have no idea what you think your first link has to do with the issue. It's a table of FTA appropriations. The relevant number is the amount of money collected from drivers in gas taxes and other highway-usage fees that was diverted to mass transit instead of being spent on roads. That number is reported in the FHWA Highway Statistics, Table HF-10. The figure for 2009 does not seem to be available, but for 2008 it was $15 billion. I'd certainly call that a huge sum.

Your attempt to justify this diversion of highway-user revenues to mass transit on the grounds of congestion relief is specious, relying on a meaningless apples-to-oranges comparison. Per your second link, the TTI estimates that mass transit provided $18 billion in congestion relief in 2009. That is the total congestion relief benefit from all transit spending. In 2009, total transit spending was about $54 billion. Therefore, the congestion relief benefit attributable to the $15 billion diverted from highway users is not $18 billion, but only (15/54) *18 = $5 billion. So drivers paid $15 billion for only $5 billion in congestion relief benefit. That is a very bad deal for drivers, and a very inefficient use of public funds.

by Bertie on Sep 7, 2011 2:30 pm • linkreport

I no doubt will regret even responding to you...

Hey, what do you know, I was right! Have fun!

by MLD on Sep 7, 2011 2:43 pm • linkreport

Linking back to your previous comment does not address the fundamental problem with it I just described.

by Bertie on Sep 7, 2011 2:53 pm • linkreport

The problem with have the gas tax a % of the price is that then revenues rise and fall with the price of gas, and not according to transportation needs. When the price goes down, driving increases, which means that roads will need more maintenance but there will be less money. Moreover an increase in the oil price stresses on the economy, as we all know from 2008. The concordant tax increases further stresses on the economy -- more people out of work.

Given the current economic climate the chance that Congress would pass such a law is nil. For good reason: it is bad policy.

by goldfish on Sep 7, 2011 4:14 pm • linkreport

^stresses the economy" ...

by goldfish on Sep 7, 2011 4:16 pm • linkreport

Bertie --

First, $18 billion is the congestion relief benefit from daily transit operation, not including capital spending. For a true apples-to-apples comparison, the spending on transit is $37 billion (the figure for operating expenses), not $54 billion (the figure for total expenses).

The federal and state contribution to operational expenditures was about $12.5 billion. So this means drivers see a benefit of (12.5/37)*18 = $6 billion in congestion relief for $12.5 billion spent.

But there is more.

Thirty percent ($11.5 billion) of the total operational transit spending comes from fares, so using your formula, transit users paid $11.5 billion for every (11.5/37)*18 = $5.5 billion in congestion relief. Since the $18 billion figure represents relief only to drivers (the relief to transit users is not factored into the methodology of the study), this $5.5 billion is considered congestion relief for drivers. That is a total relief of (6.5+5.5) = $11.5 billion for every $12.5 billion spent, or a 92% return for drivers.

by Scoot on Sep 7, 2011 5:28 pm • linkreport

I think some of you are barking up the wrong tree. If its environmentally conscoius smart growth you want, increasing the gas tax to pay for more roads is not what you want. If ypu thomk that the imcrease will go to something other than roads, ypu're dreaming. Your best hope for smart growth is to hope for more local control and less federal or even state interference. Take a look at what arlington has to do to fend off state interference in their smart growth. And, bear in mind that VA is a purple state thats pretty representative of where the country stands on the political divide.

by Falls Church on Sep 7, 2011 5:33 pm • linkreport

Math error, 6.5+5.5 = 12, so that is a 96% return for drivers, not 92%.

by Scoot on Sep 7, 2011 5:35 pm • linkreport

If its environmentally conscoius smart growth you want, increasing the gas tax to pay for more roads is not what you want.

True. What I want is to increase the gas tax to pay for the current roads (which doesn't happen), as well as environmental mitigation, congestion reduction and debt reduction on the war in Iraq.

by David C on Sep 7, 2011 6:28 pm • linkreport

Great post. I have a different perspective I want to offer from Seattle.

WA and OR have seen *declines* in VMT (aggregate or per capita I forget, but Sightline.org has the data) for ~11 years. I suspect the same will happen soon in the Northeast if it hasn't started already. It's true that this must mean less wear on our transportation infrastructure, but more acutely, it means falling gas tax revenue. (WA last raised its gas tax in 2005, and the increase survived an initiative challenge) Drivers favoring more efficient cars, and hybrids and electrics, exacerbates this. There's a general consensus that further gas tax increases are futile, though I don't know if there's been real consideration of shifting to a sales tax instead of excise (which would have larger implications due to our state constitution).

A sales tax on gas is an interesting proposition because it not only keeps up with inflation, but keeps up with gas prices and partly offsets drops in gas consumption and increases in fuel-efficiency. To the extent that people buy less gas because its price rises; a sales tax on gas keeps the revenue steady. Five gallons @ $4 = four gallons @ $5. This could really help in the peak oil era.

What WA seems to be moving toward is much more extensive tolling, which I think is another great component of the stool of transportation funding components we need. I know Eric Cantor would freak, but we need to phase in tolling of all the interstates. This affects all vehicles equally and reduces driving (or encourages more efficient choices) rather than gas consumption.

OR has at least experimented with VMT taxes, which Jim Oberstar advocated. We need these too. Taxes or fees based on pollution/emissions would make sense, as do progressive taxes on cars or their registrations. "Car taxes" went through a period of demonization, reduction, and elimination; but we're going to need them back. Until 2000 WA had a tax that charged owners a small percentage of their car's value each year. That adds needed progressivity to the mix of tolls, gas taxes, and VMT taxes.

In the meantime, the federal gas tax is much too low. Ross Perot proposed a 50 cent increase in 1992. George Bush's own transpo revenue commission recommended a 40 cent increase around 2005. We need a substantial increase to make the Highway Trust Fund self-sustaining again, but then we need to add these other revenue sources to fund a more sustainable transportation network less focused on cars.

by Jon Morgan on Sep 7, 2011 7:27 pm • linkreport

@David C -

Thanks for your work, thats exactly what I was looking for to suppliment Matt's analysis -- a graph targeted at the specific use of the tax of paying for road maintanance.

by Ryan D on Sep 7, 2011 7:27 pm • linkreport

First, $18 billion is the congestion relief benefit from daily transit operation, not including capital spending. For a true apples-to-apples comparison, the spending on transit is $37 billion (the figure for operating expenses), not $54 billion (the figure for total expenses).

Huh? The $18 billion is an estimate of the total annual congestion relief benefit from transit. The costs of transit include both operating costs and capital costs. Are you seriously under the impression that transit services can operate without transit infrastructure?

by Bertie on Sep 7, 2011 8:28 pm • linkreport

Indexing gas taxes to the price of gas (as converting the tax to a sales tax would do) makes the difference even more stark. Historic gas prices are here:
http://www1.eere.energy.gov/vehiclesandfuels/facts/2005/fcvt_fotw364.html

It appears that retail prices were around 19¢/gallon in the 1930s, when 4-5¢ state gas taxes were in effect around here, plus the 1¢ federal tax; that implies that there was the equivalent of a 41% sales tax on gas during the nation's deepest economic depression ever. An equivalent tax on today's typical DC gas price of $3.60 (of which $0.419 is tax) would result in a $1.30/gallon tax and a "new" gas price of $4.48.

Of course, had gas taxes always been levied at these rates, prices would have been higher earlier, demand would thus be lower today, and the resulting prices would probably also be lower. Strange how that works.

A well-designed policy could even balance out price swings. Several people have suggested setting a target price for gas, with taxes picking up the "extra" whenever prices decline. Similarly, gas taxes could be put on an automatic escalator to allow time for the public to adjust, and "cash for clunkers" style rebates could be given to upgrade fleet fuel economy.

@Jon Morgan: VMT plateaued and declined nationally as well; I haven't looked up numbers specific to the Northeast or to the NCR, but I suspect that the trend was even more marked around here.

by Payton on Sep 7, 2011 8:41 pm • linkreport

@ Pelham:The Obama-Bush tax cuts were supported by both parties...as was the war. But, these are not the only causes of the deficit. Medicare and Social Security are trillions of dollars underfunded. That is also known as debt...so yes there is bankruptcy. It's nice to pass along theory as fact but fact is fact.

Facts

by Jasper on Sep 7, 2011 9:12 pm • linkreport

Bertie -

the TTI methodology defines public transportation as "regular route service from all public transportation providers in an urban area". I.e. operation costs, not capital costs. I'm not saying capital costs do not exist, but simply, they do not appear to be included in the methodology.

As MLD noted, it is a rather simple calculation - drivers are receiving $18 billion in congestion benefit for a $12.5-$15 billion investment. This is because according to TTI methodology, the prediction of $18 billion is solely a reflection of congestion relief for drivers. Given most of the data in front of us, it's impossible to figure out exactly how much congestion is relieved from investments from state and federal funds, given the myriad ways that money is invested across cities, states and regions.

by Scoot on Sep 7, 2011 9:17 pm • linkreport

the TTI methodology defines public transportation as "regular route service from all public transportation providers in an urban area". I.e. operation costs, not capital costs.

No, NOT "i.e. operation costs." The cost of providing "regular route service from all public transportation providers in an urban area" includes both capital costs and operating costs. Your claim that you can simply ignore the costs of purchasing the transit vehicles, building rail track and stations, etc., just doesn't make any sense.

by Bertie on Sep 7, 2011 9:25 pm • linkreport

Drivers aren't paying for transit. They're paying taxes related to using gasoline.

Then, governments, using revenue primarily from taxes is paying for transit.

They're really two separate issues. They should be decoupled.

by David C on Sep 7, 2011 10:38 pm • linkreport

No, they're both transportation, land use, environmental, economic, and social issues. They should be linked. Given that most transportation has to be subsidized, we should be subsidizing modes that are economically, socially, and environmentally beneficial. And we should be discouraging modes that are harmful in those ways. Price signals are key; there was a post on The Infrastructurist or Transport Politic not long ago showing that raising gas prices does more to increase transit ridership than lowering fares. Damaging transportation modes should cost more and subsidize the healthier ones.

by Jon Morgan on Sep 8, 2011 12:36 am • linkreport

Given that most transportation has to be subsidized, we should be subsidizing modes that are economically, socially, and environmentally beneficial.

That pretty much excludes urban light rail, then.

by Bertie on Sep 8, 2011 2:12 am • linkreport

@Jon Morgan: Five gallons @ $4 = four gallons @ $5.

Reducing gas consumption that much, 20%, can only happen painfully and over some years. In the mean time voters justifiably agitate for economic stimulus because many are out of work, due to high fuel costs -- like what is happening now. This puts pressure on politicians to lower taxes, including those on gasoline -- like now.

by goldfish on Sep 8, 2011 9:47 am • linkreport

@ goldfish:many are out of work, due to high fuel costs

You can't back that up. There is no relation between the bank induced recession and fuel prices.

by Jasper on Sep 8, 2011 9:53 am • linkreport

Jon, I'd say they're related, but should not be coupled. We shouldn't fund the transportation system only with money that we can get out of transportation taxes any more than we should fund the Park system only with money we can get out of parks.

We should make one decision about how to tax and another about what to spend that on (not necessarily in that order). But the idea of dedicated revenue is lazy and divisive.

by David C on Sep 8, 2011 10:02 am • linkreport

@Jasper: see table 12 here. The high price case, a 70% increase in price of oil, spread out over 10 years from the 2006 price ($60-$70/bbl), will increase unemployment about 0.5%. This was written before the 2008 price shock. Such shocks cause more damage because people do not have time to plan and coordinate their responses.

by goldfish on Sep 8, 2011 10:21 am • linkreport

@ goldfish: So, 0.5% of the 9% unemployment is due to oil. Great. That leave 17 times many more people out of work not due to oil. Oil is a small factor in unemployment. Specifically, it's not high prices that cause unemployment, but increases in price. Gas is wayyyy more expensive in Europe and it's unemployment is similar to that in the US.

by Jasper on Sep 8, 2011 10:42 am • linkreport

Jasper: Don't be so dismissive of an extra 0.5% unemployment, particularly when it is added to other problems. What if you were among them?

What triggered the current banking and housing crisis was the 2008 oil price shock. The article I linked to was unsatisfactory because at the time, there was little difference between the price of Texas and Brent crude. However, due to difficulty in Libya, the price of Brent crude is currently running $20-30 higher than the oft-quoted Texas crude price, which accounts for about $0.70/gal increase in gas. This wrinkle was not considered in the study, so the effect on unemployment is underestimated.

To compare unemployment and gas prices in "Europe" to the US is problematic. On the one had, the unemplyment in Spain is 21%, in Ireland 14.5% but Germany is only 6.1%. Obviously there are many, many variables besides the cost of gas and its taxes.

by goldfish on Sep 8, 2011 11:10 am • linkreport

Comparing unemployment rates across countries is a dicey proposition. Because each country sets its own definition of "unemployment". Historically, the US has usually had low unemployment rates, because we have among the narrowest definition of unemployment. If you've given up looking for work, for example, you're not counted here. European countries have historically had higher unemployment rates because they have significantly broader definitions of unemployment. Conservative politicians often point to "high" unemployment rates in Europe as evidence of their economies performing poorly. But it's not an apple-to-apple comparison, and it's very hard to get standardized data to make one.

I will point out that while Canada has a broader definition of unemployment than the US, their rate has been lower than ours for a while now, by roughly 2 points. They are a net exporter of oil and many other natural resources we import.

How long it takes US drivers to reduce their gas consumption by 20% isn't really central to my point, which was that taxing the total sale amount of gas in dollars, rather than a flat number of cents per gallon sold, could stabilize revenue even as gas consumption falls (due to inevitable factors like higher prices, more efficient cars, and more hybrids and electrics).

by Jon Morgan on Sep 8, 2011 1:27 pm • linkreport

@Jon Morgan: How long it takes US drivers to reduce their gas consumption by 20% isn't really central to my point...
The fleet will have to be replaced fully reap improved efficiency. This takes around 15 years. In the short term (< 1 year), tax revenues rise and fall with price, which can fluctuate by a factor of 1.5. The result is that the revenues go up and down about 50% over a few months -- they will be LESS stable than they are now.

by goldfish on Sep 8, 2011 2:18 pm • linkreport

@ goldfish: This is getting sidetracked, but ok:To compare unemployment and gas prices in "Europe" to the US is problematic. On the one had, the unemplyment in Spain is 21%, in Ireland 14.5% but Germany is only 6.1%.

Just like unemployment in MI, CA and NV is way higher than in VA, MD and ND.

@ Jon Morngan:Comparing unemployment rates across countries is a dicey proposition.

True. That's why I am not comparing the unemployment of Belgium and the US. I am comparing the unemployment of the US and the EU. Both are near continent-filling blocks. It's a technicality that one is a country and the other is a multilateral collaboration.

Actually, the disparities you see in the US and the EU are very similar. CA and Italy are both in a hole due to poor management. Just like Greece and MI. Spain, NV and FL are all in a hole because of the collapsed real estate market. Luxemburg, Cyprus, ND and VT are doing well because they're so small and completely under the radar. Both blocks have significant differences in geography, history and politics. And they are the two largest economies in the world.

by Jasper on Sep 8, 2011 2:26 pm • linkreport

Jasper: Your graph is ludicrous. There is nothing in there of the 50+ trillion in unfunded mandates to Social Security & Medicare. You also don't point out how much revenue was generated by the BUSH & now OBAMA Tax Cuts. Little known fact: The most consecutive months of job growth, for any President, took place under Geroge W. Bush. Ironic indeed seeing as he was a lousy financial manager...however the graph made with 'no factual basis' doesn't make your point. With tax cuts come jobs and with jobs greater revenues. Kennedy & Reagan understood this. How about doing a graph of what the US economy would have done coming out the the Recession Bush inherited from Clinton and the 9/11 attacks. Also like to point out that both Democrats and Republicans voted for those tax cuts and keep them going with Obama's signature.

by Pelham1861 on Sep 8, 2011 2:28 pm • linkreport

Second thought on my own comment:It's a technicality that one is a country and the other is a multilateral collaboration.

It's funny that those in the US arguing for less Fed and more state's rights, are the same ones horrified by Europe, where the lack of a unified EU government is exactly standing in the way of action to solve the problems.

by Jasper on Sep 8, 2011 2:29 pm • linkreport

@Pelham1861, With tax cuts come jobs and with jobs greater revenues.

But not enough to make up for the lost taxes.

"Even over the long term, once you've allowed all of the extra growth to feed through into extra revenue, cuts in capital taxes juice the economy enough to recoup half of the lost revenue, and cuts in income taxes deliver a boost that recoups 17 percent of the lost revenue. So a $100 billion cut in taxes on capital widens the budget deficit by $50 billion, and a $100 billion cut in income taxes widens the budget deficit by $83 billion."

by David C on Sep 8, 2011 2:56 pm • linkreport

Sure, in 2008 it was an "oil price shock" and not house prices in total free fall, thereby stopping the game of mortgage musical chairs, that "triggered the current banking and housing crisis." My, what short memories we have.

by Payton on Sep 9, 2011 1:25 am • linkreport

@Pelham18xx:
Jasper: Your graph is ludicrous. There is nothing in there of the 50+ trillion in unfunded mandates to Social Security & Medicare.

You've given us an excellent example of 'epistemic closure' at work.

by oboe on Sep 9, 2011 8:51 am • linkreport

Just to elaborate: the projected Social Security shortfall over the course of the next 75 *years* is $3.7 trillion. That's assuming we have no growth, and no changes are made to the Wage Base limit.

http://www.factcheck.org/article302.html

The real budget-killer is the growth of Medicare. Of course, it's not Medicare that's the killer, it's the growth of health care spending. We can address that by getting smarter about how we spend our money (i.e. single-payer, and "rationing") or we can do it by denying care to old people.

The "conservative" approach of sprinkling magical laisez-faire capitalism dust over everything is likely to be unsuited to the magnitude of the task.

by oboe on Sep 9, 2011 9:29 am • linkreport

Also, yes, my French sucks. No need to remind me.

by oboe on Sep 9, 2011 9:30 am • linkreport

@ Pelham:There is nothing in there of the 50+ trillion in unfunded mandates to Social Security & Medicare.

That's because they don't actually are in the deficit. You are confusing different things. Also, social security is not bankrupt. It is slightly underfunded.

http://taxvox.taxpolicycenter.org/2011/09/08/rick-perry%E2%80%99s-social-security-myth/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+taxpolicycenter%2Fblogfeed+%28TaxVox%3A+the+Tax+Policy+Center+blog%29

You also don't point out how much revenue was generated by the BUSH & now OBAMA Tax Cuts.

None. Deficit has boomed ever since they've been enacted. But since you believe that they're also Obama's tax cuts, do you think that was a good thing of Obama to do?

The most consecutive months of job growth, for any President, took place under Geroge W. Bush.

Too bad they were all wiped out before he left office. This statement is similar to the statement that Bush's kept the US safe from terror attacks. After 9/11 perhaps.

Ironic indeed seeing as he was a lousy financial manager...

Indeed. He came in with a surplus and left with a massive deficit. Under his watch unemployment doubled. And the economy collapsed.
however the graph made with 'no factual basis' doesn't make your point.

I am not sure I understand this phrase. The graphs was made by smart economists, and it does make my point.

With tax cuts come jobs and with jobs greater revenues.

Not necessarily.

Kennedy & Reagan understood this.

Reagan was the guy who lowered taxes and then increased taxes not once, but twice, right?

From Wiki:
"Reagan followed his 1981 tax cut with two large tax increases."
http://en.wikipedia.org/wiki/Reaganomics

How about doing a graph of what the US economy would have done coming out the the Recession Bush inherited from Clinton and the 9/11 attacks.

9/11 happened under Bush, not Clinton. Clinton left Bush with a surplus and low unemployment. Bush left Obama a massive deficit and double the unemployment.

Democratic presidents do better than republicans in terms of economy.

http://www.washingtonmonthly.com/archives/individual/2005_05/006282.php

Also like to point out that both Democrats and Republicans voted for those tax cuts and keep them going with Obama's signature.

Oh, so the bad results from those tax cuts that you deny are not also Obama's fault? Or, are the good results that came from those tax cuts now also Obama's credit? Difficult choice.

I also seem to remember that Obama only signed the extension of those tax cuts after significant blackmail by republicans. But that is besides the point. Either you give him credit for extending the cuts, because Bush was right. Or you stop bitching about them, and give Obama some credit.

Finally, please don't call me a partisan hack. I can't vote in this country which allows me to look at this from a larger perspective.

And oboe is right:
You've given us an excellent example of 'epistemic closure' at work.
and
The real budget-killer is the growth of Medicare. Of course, it's not Medicare that's the killer,

In fact, the killer is Medicare Part D, enacted without funding by Bush and the republicans.
http://en.wikipedia.org/wiki/Medicare_Part_D

by Jasper on Sep 11, 2011 9:54 am • linkreport

@ oboe: Also, yes, my French sucks. No need to remind me.

Jamais.

by Jasper on Sep 11, 2011 9:56 am • linkreport

@ Pelham: Hey, I've been reading up on this Reagan fellow. Interesting guy. Former union leader. Raised taxes twice. Signed a law that resulted in 2 million abortions. Wasted billions of dollars on a military project that still has not been completed decades later (Star Wars).

Why exactly do republicans like this guy?

by Jasper on Sep 11, 2011 10:36 am • linkreport

If you check out this story:
http://subsidyscope.org/transportation/direct-expenditures/highways/funding/analysis/

You can see the proportion of highway funding that comes from all user fees (gas tax, car registrations fees, etc) and what proportion comes from the general fund. The long and short of it is that in the 60s, 70% of highway funding came from user fees. In 2007, it was 51%. Additionally, there's less money coming from the federal government, so a lot of states are having to fork over more general funds.

by Kaitlin on Sep 12, 2011 6:20 pm • linkreport

FYI, it's even worse if you figure out the amount of tax per mile over time--that is a clearly downward sloping curve over time.

http://mobikefed.org/2012/03/federal-gas-tax-it-historic-high-or-low

by Brent on Mar 18, 2012 2:58 pm • linkreport

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