Don’t raise the gas tax
Shift to users fees, tolls or VMT
I HAVE WATCHED with a combination of amusement and amazement as columnists across the ideological spectrum have recently called for a federal gas tax hike. First it was the Washington Post’s stalwart conservative Charles Krauthammer, then the liberal Gail Collins in the Times. Columbia University’s Jeffrey Sachs endorsed a hefty gas tax increase in Politico. Locally, the Globe’s Dante Ramos weighed in with his own call for an increase in the federal gas tax. Everyone’s on board.
Well, not everyone.
Last September, I wrote in Commonwealth that “the gas tax is not the future of transportation funding.” Nothing has changed to alter that statement. The current frenzy to raise the federal gas tax was triggered by the recent steep decline in gasoline prices. The idea underlying support for a federal gas tax increase has a charming simplicity: people won’t mind paying a bit more at the gas pump since their overall fuel costs have so sharply decreased. Yet time and experience teach that the gas tax is a politically unpopular approach to raising transportation revenue. Indeed it can be toxic – this I know from personal experience. Let’s stipulate to that. Let’s also stipulate to these facts: people are driving less, and they are driving cars that are significantly more fuel efficient as a result of improved internal combustion technology or hybrid/electric technology. As a result, gas tax revenues have been declining for the past decade, and they are forecast to continue on a slow and steady decline.
The number of vehicle miles traveled in the United States has declined each year for the past decade. This trend appears to be the new norm as younger people are rejecting an auto-centric approach to mobility, preferring to take alternative modes of travel. This demographic change, combined with changes in how we conduct business (technology enables people to communicate, conduct meetings, check in with their doctor, and even attend college classes via the Internet) makes driving and its attendant inconveniences (chronic traffic congestion, high costs for parking in urban areas) less and less appealing. Moreover, because the federal gas tax is not adjusted for inflation, the 18.4-cent federal tax is worth 38 percent less than it was worth when it was last increased 20 year ago. Voters in Massachusetts recently rejected an inflation adjustment for the state’s gas tax, sending a message loud and clear to all who will hear it: stop relying on the gas tax to fund transportation needs.
Why chase a revenue source that politicians and voters are loathe to support? Why push for a revenue source that is in rapid and unstoppable decline? Why approach 21st century transportation needs with a 20th century funding solution? Those are the hard questions that must be answered, and the honest answer to each of them leads to one conclusion: it no longer makes sense to look to the gas tax as the principal source of transportation revenue.
Raising the gas tax now, when oil prices are low, is a cop-out, a way to avoid making the important, long-term decisions that must be made to secure our transportation future. I have advocated for a “three-legged stool” approach to generating net new transportation revenue: (1) smart public/private partnerships, (2) empowering municipalities through Transit Improvement Districts, and (3) adopting technology-driven solutions, including expanding our highway, bridge, and tunnel-toll system, and imposing a pure user fee – a vehicle miles traveled fee – on motor vehicle use. Each of these initiatives requires some form of congressional or state action to make them happen (although we have a transportation public/private partnership statute, it requires either amendment or a more detailed regulatory framework to operate effectively). I would like to focus here on the user fee issue.
The federal government has historically placed severe restrictions on states wishing to convert interstate or state highways into user fee or toll facilities. These restrictions were based upon the old and no longer viable argument that these facilities were built by tax dollars and should be maintained as non-user fee assets. It is long past time for Congress to eliminate its antiquated restrictions and allow states to convert their interstate highways into modern toll or VMT systems that enable free flow of traffic and allow for dynamic pricing, making use of new technology that enables toll transactions to be read by chips implanted in registration stickers or license plates, or tracking distance (not location) through GPS or Bluetooth technology.
Taking this step forward ought to fit comfortably into the ideology of congressional Republicans who believe in transferring power and decision making to the states, and it ought to find support among congressional Democrats who believe in the importance of developing a steady and reliable source of net new transportation revenue. The Massachusetts Transportation Finance Commission reported that a modest vehicle miles traveled (VMT) user fee of 5 cents per mile imposed only on the state’s interstate highways would generate $550 million a year. The revenue would likely exceed $1 billion a year if you include the state highway system. If you introduce dynamic congestion/peak hour pricing to the equation, and dedicate congestion-pricing revenues to transit, you can raise significant net new revenue for public transportation projects.
You must by now be asking yourself, “Why turn to tolls or VMT when you’ve already said that people are driving less?” That’s a good question. It points to a larger, long-term challenge in the effort to extract stable, robust transportation revenue from transportation sources. Policy makers ought to look to VMT and tolls as transitional approaches to moving away from the gas tax. For now, I have three answers to that question.
First, user fees (tolls or VMT) will provide a more stable and robust revenue source than the gas tax. This is because user fees do not face volatility based upon third-party (oil company) pricing decisions and they capture revenue equally from all vehicles without regard to whether they are more or less energy efficient. The pure electric vehicle pays the same amount as someone with a traditional internal combustion engine. Second, user fees can be dynamic, permitting congestion and peak hour pricing strategies that can generate more revenue while also encouraging modal shift. As I have pointed out, a good portion of that new revenue could be dedicated to public transportation, the area most in need of net new revenue. Third, the technology exists to make user fees the best and easiest approaches to introduce quickly and efficiently. Yes, there are long-term issues that we will have to face if the decline in vehicular travel continues unabated, but let’s get past this moment before we engage that fairly far off longer-term issue.
States on the West Coast have been taking the lead. Oregon was the first state to embrace piloting and planning for VMT. California Gov. Jerry Brown signed a law last fall that set up a commission to study a VMT user fee and establish a pilot program by January 1, 2017. Here in Massachusetts we’ve already had a bi-partisan commission report on the need to introduce VMT. Perhaps Gov. Charlie Baker and the Legislature, leveraging the commission’s 2007 report, will consider the California approach and establish a pilot program of volunteers to prove the efficacy of VMT in Massachusetts. I will be first in line to volunteer and give it a try.
James Aloisi is a former state transportation secretary and a principal at the Pemberton Square Group.