Gas Tax Hike Debated In Virginia, Iowa As Revenues Disappoint

In 2009, Virginia Gov. Bob McDonnell, a Republican, ran against Democrat Creigh Deeds in part by hitting his opponent over a vote to increase the state's gas tax.

Now, just two years later, McDonnell seems to be waffling. "It's just math," he told WRVA, according to the Washington Post. "You're going to continue to have less revenue -- and more demand for roads and more people driving them."

A McDonnell spokesman quickly backtracked on the statement, saying the governor would not raise the tax -- but that legislators in the state would still like him to consider it. The state's gas tax of 17.5 cents per gallon, one of the lowest in the country, has not changed since 1986.

States across the country are giving a longtime political hot potato, the gas tax, another look as revenues disappoint and road repair backlogs mount. Political leaders from both major parties in Iowa and Maryland are also considering raising state gas taxes.

The move, which comes despite widespread public disapproval, illustrates the growing gap between gas tax revenues and transportation infrastructure spending needs. In recent years, Congress has actually been forced to transfer $34.5 billion of general tax revenues between 2008 and 2010 to cover the gap between what we take in and expenditures promised under the federal transportation bill.

Americans are driving less and using more fuel-efficient cars when they do drive, meaning that gas tax revenues are down across the board. And the fact that the federal and most states' gas taxes are not pegged to inflation means that the fixed amounts devoted to the tax -- 18.4 cents at the federal level -- are worth less in real terms every year.

"What we're seeing is the huge hole that exists right now for infrastructure funding is putting states in the positions of having to figure out some way to fix the gap," said Rob Perks, the transportation advocacy director for the National Resources Defense Council.

"I think the states are saying we have no choice. We cannot pay for the construction or repair work on bridges or roads that we already have," Perks said.

If they opt for gas taxes, however, politicians will likely be setting themselves up for a political backlash. Some 77 percent of Americans are against raising the federal gas tax, according to a December Reason-Rupe poll. Opposition cuts across party lines, with 66 percent of Democrats opposed.

In Iowa, another Republican governor, Terry Branstad, said he would "definitely consider" raising the tax. Maryland Gov. Martin O'Malley, a Democrat, is also looking into it. Just a few months ago, the Blue Ribbon Commission on Maryland Transportation Funding recommended raising the gas tax by 15 cents over three years.

As their thus-far hesitant language shows, politicians of both parties are approaching the subject gingerly for fear of angering voters. Many academics say, however, that from a policy perspective, raising the gas taxes has some surprising hidden benefits.

Economist Christopher Knittel of MIT has found, for example, that increasing the gas tax would get Americans fuel-efficient cars more quickly and more efficiently than simply mandating tougher fuel efficiency standards, as the Obama administration has proposed.

Carmakers have actually been extraordinarily successful in making a gallon of gas last longer over the last 30 years, he said. But those improvements have been funneled into bigger, heavier cars like SUVs.

"Had we kept weight and horsepower at their 1980 levels, fuel economy would have increased by 60 percent instead of the 15 percent we observed," Knittel said.

So auto manufacturers could give us more efficient cars -- if only there were more market demand. And Knittel said he believes the best way to foster that demand would be to put a price on gas.

"Basic economics tells us that unless consumers are facing the right price, the social price of gasoline, you're not going to get the efficient outcome," he said.

"All the levers that we want to push or pull are pooled with the gas tax, as opposed to a [fuel efficiency] standard, which ignores all the cars on the road," he said. "Consumers shift to more fuel-efficient vehicles, they drive them less, the old Yukons and Explorers get retired faster."

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Comments

[Edy Kel]

05:26 PM on 01/19/2012

It's just another hit and run on the middle and lower classes, while they give wide birth to the top classes.

[Mr Crabs]

04:48 PM on 01/19/2012

You see it's ok to tax the little guy but the "job creators" that's out of bounds.

[Adam Lassila]

09:46 PM on 01/19/2012

We should have a $5/gallon gas tax but refund all that money back equally.

But I can't afford $8/gallon! Actually, this plan will have no net cost to American consumers. Every penny collected will be refunded back to the American people, evenly. Thus, if the gas tax paid per capita in a year is $3,000, and you only paid $2,000, you'll still receive a $3,000 refund, resulting in a $1,000 profit. You can think of that as a bonus for polluting less than the average American. Luckily, most Americans use less than the average because a large part of our gas is consumed by those big corporate trucks moving their products around the country. Of course, this will result in some price increases in these products, due to the removal of what is essentially a gas subsidy provided by a government until now unwilling to ensure that the cost of pollution is included in its price. However, these price increases will be countered by the refund amount, resulting in a neutral impact on the economy. This policy merely corrects a market price that doesn't reflect the externality of the societal costs of burning gasoline.
The benefits are numerous. As it becomes more cost-effective to use renewables and to conserve energy, we'll use less gas as a whole, reducing the effect onthe climate and our demand for foreign oil. Locally grown food and doemstically manufactured goods will be better able to compete with products transported over long distances.