Recent headlines tell the story of Congressional Republicans fighting with Democrats over highway funding. Republicans, who control the House, are holding funds to the states hostage in the hopes of forcing reductions in spending — or, at least, transferring more of the cost onto states. (How that helps taxpayers we’re not sure, but Republicans could at least claim they reduced federal spending.)
At stake in Vermont is about $100 million in federal funds for 38 projects — representing one of the largest road construction and maintenance seasons in Vermont’s history.
Rep. Peter Welch, D-Vermont, has a commonsense way to salvage that funding. Raise the federal portion of the gasoline tax.
While Rep. Welch has been shy to say just how much he would hike the gas tax, a 10-cent jump has been previously suggested by House Democrats, which would raise $105 billion annually.
Pretty radical, you say? That’s just like a Democrat to raise taxes every time the need arises.
Well, taxes do need to keep pace with expenses or deterioration is the result. As it is, the federal gas tax of 18.4 cents per gallon hasn’t been raised since 1993.
That’s right; more than two decades ago.
Construction and maintenance expenses, however, have risen considerably over the past 21 years. On the conservative side, any third-grade student could take the average annual inflation rate of say, 4 percent, and multiply it by 21 years to understand costs have gone up significantly. It’s no wonder then that Congress has been raiding other funding sources (or just chalking up more red ink), and state and local governments have been postponing expensive bridge repairs or replacements and deferring maintenance to roads — all to the detriment of the nation’s economy.
The lack of problem-solving (primarily, the reluctance to raise taxes to keep pace with expenses) is why Congress this week has been pondering what to do with the $9.7 billion shortfall in the federal Highway Trust Fund, not to mention the roughly $40 billion in annual highway maintenance costs the federal government contributes.
The Republicans’ answer? According to Welch, House Republicans have proposed a temporary ‘paper’ fix that would keep the fund solvent through next April or May by essentially creating another tax loophole for wealthy corporations. The proposal would create what Welch said was a “pension smoothing” provision that would allow corporations to cut the sum they put into employee pension funds. As the GOP thinking goes, corporations would make more profits as a result of the spending cuts and, therefore, pay more taxes. The increase in corporate taxes, as the Republican plan proposes, would be earmarked for the Highway Trust Fund.
Right. And that’s the short-term fix; long-term the GOP plan is to shift more expenses to state and local governments.
Welch’s proposal is obviously the preferred approach because the federal government needs a long-term, reliable source of revenue for repairs and construction of our nation’s highways; not to mention the positive results to the environment when fuel costs are higher and reflect a truer representation of the cost to society.
That said, the funding is not that big of a deal.
According to a 2011 report of the Congressional Budget Office, in 2007 “the public sector spent $146 billion to build, operate and maintain highways in the United States.” Of that expense, according to the report, the federal government paid about 25 percent of the total (roughly $36.5 billion), while state and local governments paid the other 75 percent.
In another study, the Federal Highway System (FHWA) reported that “to maintain the highway system at its current performance (based on 2006 data) would require $126 billion per year in capital spending by all levels of government,” and if the federal government were to pay for its historical commitment “of 45 percent of capital spending for highways, the necessary federal spending per year would be $57 billion, an amount that exceeds actual federal capital spending for highways in 2009 by $18 billion, or nearly 50 percent.”
But let’s not get too deep into the weeds of budget numbers and trying to make sense of reports that blur the dates data is cited with budgets of another year, and suffice it to say that the budget for roads and bridges — for federal, state and local governments — is a manageable number. Even if we assume total federal spending is $60 billion a year, the 10-cent bump on the federal gas tax could generate substantially more than that total — and that’s in addition to the 18.4 cents already applied to a gallon of gas. (As a comparison, the federal government spent about $680 billion on defense in 2009, plus another $37 billion on the wars in Iraq and Afghanistan.)
Now, we get that raising the gas tax is a regressive tax, and it will spark inflation on all things that require shipping — particularly food.
But 10 cents on a gallon of gas equates to about $75 per year for the average driver, according to a fact sheet from the Associated General Contractors of Vermont. Break it down, and that’s $1.44 per week or 21 cents per day.
That’s not a lot to solve what Republicans in Congress seem to think is an insurmountable problem that requires convoluted tax loopholes that enrich corporations, while putting an even greater burden on states and local governments. It is also an example of how the pledge not to raise any taxes has made government so dysfunctional.
Angelo S. Lynn