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Feb 12, 2014

It's Time to Raise the Federal Gas Tax


President and CEO, U.S. Chamber of Commerce

gas pump.JPG

Photo: Daniel Acker/Bloomberg

Reauthorization of MAP-21, the surface transportation spending bill that expires in September, promises to be a contentious fight, but it doesn’t have to be. There is broad consensus on a number of fundamental principles. 

The stakeholders in this debate agree that our infrastructure system is a critical national asset that drives growth, jobs, safety, mobility, trade, and enhanced global competitiveness; that we’re running out of money to fund this system; that the federal government must take a leading role in making sure our infrastructure system contributes to a strong economy; and that we need a predictable, stable, and growing source of revenue for today, an intermediate funding solution for tomorrow, and, in the long run, a new system.

When you look at the big picture, the simplest, most straight-forward, and most effective way to generate enough revenue is by increasing federal gasoline and diesel taxes.

The gas tax hasn’t been increased since 1993. Cars are more fuel efficient, people are driving less, and inflation has eaten into purchasing power. As a result, the Highway Trust Fund is going bankrupt. We are already borrowing billions of dollars from the general fund. Next year there will be a $13 billion cash shortfall. By 2020, it will be $100 billion. A moderate increase in the gas tax phased in over time would provide the necessary funding, preserve the important “user pays” principle, and provide needed stability.

How do we do it?

First, we need our elected representatives to show some courage and leadership. They need to do what’s right for a change, not what’s politically expedient.

Second, we need to educate the public. Polls show opposition to a gas tax increase is overblown. A San Jose University researcher found that 58% of the public would support a gas tax increase if they knew it would be applied to building and maintaining roads, bridges, and transit systems. Voters want to know where the money is going and that it is not going to be wasted. Far too many people are unaware of important reforms that eliminated earmarks and “pork barrel” spending long associated with infrastructure funding.

Let’s also be clear about the consequences of decreased investment—it means higher costs for goods, more congestion, and increased accidents, as well as reduced mobility and competitiveness. Business is absolutely committed to aggressively pursuing this education effort.

And third, let’s build upon the support for a gas tax increase that already exists within the business comunity, organized labor, the construction industry, shippers, truckers, and AAA. There's also political support in the states. Last year six states—three with Republican governors and three with Democratic governors—enacted bills to increase overall state gas taxes. The sky didn’t fall, and their economies have not collapsed. Both Republican and Democratic presidents have approved modest gas tax increases, including Ronald Reagan. So, it can be done.

Let’s keep in mind that public money is only part of the equation—we must increase private investment as well. The private sector is prepared to pump as much as $250 billion into public-private partnerships, or P3s, if only certain barriers would be removed. We must also continue to aggressively root out waste in the system, much of it caused by permitting delays and obstacles, as well as make sure funds are spent on genuine priorities.

Long-term, the U.S. Chamber is willing to entertain different proposals for a new public funding mechanism. However, currently we’re not willing to support any proposal that eliminates the federal role, undermines the “user pays” principle, or unfairly singles out a specific industry to foot the bill.

We know what won’t work. Scaling back or eliminating a dedicated source of federal funding means greater congestion, higher transportation costs, and more accidents from poorly maintained roads. If we give up the Highway Trust Fund and rely on the general fund, we’ll never be able to execute long-term capital projects. We would have to cut other programs or engage in more deficit spending, and we would have to debate funding every single year. Devolving responsibility to the states means we’d lose national connectivity essential to moving American goods, economic growth, and global competitiveness.

None of these approaches supports a growing, sustainable source of funding. They do not signal a real commitment to investing in one of America’s most important economic assets - its infrastructure.

Passing a long-term reauthorization bill and modestly raising the gas tax does. It is a smart, fair, and achievable ways to meet our intermediate infrastructure funding needs.

Donohue testified before the Senate Committee on Environment & Public Works on February 12, 2014.

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About the Author

Thomas J. Donahue
President and CEO, U.S. Chamber of Commerce

Thomas J. Donohue is president and CEO of the U.S. Chamber of Commerce.

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