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Posts Tagged ‘Gas Tax’

I’ve argued (repeatedly) that we should abolish the Department of Transportation and allow states to make decisions on how to fund and whether to fund transportation projects.

As an interim measure to control federal spending, involvement, and intervention, I’ve explained that Congress should do nothing to increase revenues into the highway trust fund.

Supporters of centralization disagree, arguing that there would be inadequate transportation funding if the federal government doesn’t have a large – and growing – role. Most of them want a higher gas tax to finance an expansion of federal transportation spending.

I’ve never thought this claim made sense. After all, how do you magically get more roads built by sending money in a leaky budget to Washington, only to then turn around and send those funds in a leaky budget back to the states? Seems to me like that’s nothing more than a unsavory recipe for an additional layer of bureaucracy and lobbying.

Well, we now have some very powerful evidence from a report in the Washington Post that states will act – at least once they conclude that “free” money from Uncle Sam won’t be as forthcoming.

While Congress remains stalled on a long-term plan for funding highways, state lawmakers and governors aren’t waiting around. Nearly one-third of the states have approved measures this year that could collectively raise billions of dollars through higher fuel taxes, vehicle fees and bonds to repair old bridges and roads and relieve traffic congestion, according to an analysis by The Associated Press. The surge of activity means at least half of the states — from coast to coast, in both Republican and Democratic areas — now have passed transportation funding measures since 2013. And the movement may not be done yet. …The widespread focus on transportation funding comes as state officials are becoming frustrated by federal inaction in helping to repair roads and bridges described as crumbling, aging and unsafe.

By the way, I have no idea if these states are making sensible decisions. Indeed, based on what was proposed (and rejected) in Michigan, I wouldn’t be surprised to learn that many of these initiative contain wasteful pork-barrel projects (just like when funded from DC). And my colleague Chris Edwards has poked holes in the assertion that we’re facing an infrastructure crisis.

But who cares? The beauty of federalism is that states are free to make their own decisions so long as they’re playing with their own money.

If they waste the money and make bad choices, at least the damage will be contained. And voters presumably have some ability to change the direction of policy if repeated mistakes are made.

To get a sense of how things would work at the state level with real federalism, here are some excerpts from a column in the Tampa Tribune by Karen Jaroch, a member of the Hillsborough Area Regional Transit agency.

…what if you could pay less at the pump? With passage of H.R. 2716 — the Transportation Empowerment Act — this could be possible. H.R. 2716 would devolve the responsibility for our surface transportation programs (including transit) to the states by incrementally decreasing the federal gas tax over five years from 18.3 cents to 3.7 cents per gallon. That reduction would empower the states to fund and manage it — not politicians and Washington bureaucrats. The bill was filed by Florida’s U.S. Rep. Ron DeSantis, R-Ponte Vedra Beach, and cosponsored by Rep. David Jolly, R-Indian Shores, with Sen. Marco Rubio co-sponsoring the bill’s twin in the Senate.

I can understand why Florida lawmakers are especially interested in decentralization.

As you can see from this map and table, the Sunshine State is one of many that lose out because of the redistribution inherent in a centralized scheme.

The real question if why politicians in California, Texas, and Ohio aren’t also pushing for federalism.

Though it’s important to underscore that this issue shouldn’t be determined based on which states get more money or less money. It’s really about getting better decisions when states raise and spend their own money.

Particularly when compared to a very inefficient Washington-centric system, as Ms. Jaroch explains.

Well-heeled lobbyists and those in Congress who would see their power base decline are in opposition. …The feds fund roughly 30 percent of Florida’s transportation infrastructure; however, the costly regulations, red tape and strings they tack on permeate the process almost universally. As a board member of the Hillsborough Area Regional Transit Authority (HART), I’ve witnessed the agency routinely shackled by federal handcuffs that are common when accepting federal funds. H.R. 2716 would wrest control from D.C. bureaucrats and politicians in 49 other states that have never commuted on our streets and roads and instead empower state and local agencies like HART that are better positioned to make these decisions. …A new state-led process would be controlled entirely by Floridians and would be absent the horse trading and infighting between 49 other states, two houses of Congress, a president of a different party and a myriad of federal agencies.

Last but not least, state and local governments will be far less likely to engage in boondoggle spending if they can’t shift some of the cost to Uncle Sam.

P.S. While decentralization is a good first step, the ideal end point is to have more private-sector involvement in transportation.

P.P.S. If you think the federal government’s involvement is bad now, you probably don’t even want to know about some of the ideas floating around Washington for further greedy and intrusive revenue grabs.

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One of the very first “accomplishments” of the new GOP majority in Congress was to approve a piece of corporate welfare to subsidize terrorism insurance for big companies.

But I tried to overlook that development since there were a few modest reforms included with the legislation. After all, you shouldn’t make the perfect the enemy of the good (even if the good, in this case, was rather anemic).

There won’t be any excuse, however, if Republicans move forward with a plan to hike the gas tax and further centralize transportation decisions in Washington.

And that’s exactly what seems to be brewing. Senator Corker of Tennessee (an otherwise generally sensible lawmaker) has put forward a specific plan.

Corker, R-Tenn., is drafting something most conservatives avoid at all costs — a tax bill. The Tennessee senator, along with Sen. Chris Murphy, D-Conn., wants the 18.4-cents per-gallon federal gasoline tax and the 24.4-cents per-gallon federal diesel tax to each increase by 12 cents over the next two years — and then be indexed to inflation.

And there are several other senior GOPers who have expressed sympathy.

“I just think that option is there, it’s clearly one of the options,” said Sen. Inhofe (R-Okla.), new chairman of the Senate Committee on Environment and Public Works. Senate Finance Chairman Orrin Hatch (R-Utah) and Sen. John Thune (R-S.D.), the third-ranking Senate Republican, also said they were open to the possibility of raising the tax.

Wow. This is so bad and so discouraging that I’m not even sure where to start.

So let’s make three observations.

1. Bad character. Every single Republican Senator cited in the two stories has pledged to the people of their states that they will oppose all net tax hikes.

For those of us with old-fashioned views on personal integrity, this is rather troubling.

Other than reminding me why I often have disdain for Republicans, this brings back bad memories of the “Read my lips, no new taxes” fiasco.

2. Bad politics. It is remarkably foolish for Republicans to tarnish and undermine the GOP brand as an anti-tax party.

When the issue is “should there be a tax hike?”, Republicans are more trusted by voters. But if the debate shifts to “Who should pay more tax?”, then the Democrats have an advantage.

So by putting a gas tax increase on the table, these Republicans are saying they want their opponents to have a home-field advantage.

3. Bad policy. Higher gas taxes at the national level are the wrong approach for several reasons.

But rather than reinvent the wheel, let me cite the wise words of my friends Larry Kudlow and Chris Edwards.

Here’s some of what Larry wrote for Townhall.

What can Sen. Bob Corker be thinking? On his first Sunday-news-show appearance of the year, right at the beginning of a new Republican Senate era, does Corker communicate a new GOP message of growth and reform? …Does he talk about rolling back Obamacare or regulations in general?  …No. His first Republican message is: Raise the federal gasoline tax.

He explains why this is a foolish idea.

American consumers and businesses finally get a break with plunging oil and gasoline prices. Main Street finally has something to cheer about. And then Mr. Corker weighs in with a wet-blanket proposal to raise federal gasoline and diesel taxes by 12 cents a gallon over two years from the current 18.4 cents. …Why not lead the way for a complete reform of the Highway Trust Fund, transportation spending and the Federal Highway Administration? …If states like California want to build $100 billion speed trains to nowhere, let them. But people in the rest of the country shouldn’t have to pay for it with gas and diesel taxes. …A quarter of HTF spending today is for non-highway purposes. …Federal rules like Davis-Bacon raise building costs for state and local infrastructure by at least 20 percent. Federal aid breeds cronyism, political connections and bureaucratic power in Washington D.C.

The point about gas taxes being diverted is important. Even if we keep the status quo, we don’t need Washington squandering road money of things such as mass transit or high-speed rail boondoggles.

Larry closes his column with a special plea.

Please, Sen. Corker, with the new Republican Congress in place, don’t turn the GOP into the dumb party.

And here are some excerpts from what Chris wrote for Cato.

He starts by debunking the notion that there is an infrastructure crisis.

…our highways and bridges appear to be improving, not getting more “troubled.” Federal Highway Administration (FHWA) data show that of the nation’s 600,000 bridges, the share that is “structurally deficient” has fallen from 22 percent in 1992 to 10 percent in 2013. The share that is “functionally obsolete” has also fallen. Meanwhile, the surface quality of the interstate highways has steadily improved. A study by Federal Reserve economists examining FHWA data found that “since the mid-1990s, our nation’s interstate highways have become indisputably smoother and less deteriorated.”

But even if we had a growing number of “troubled” and “deficient” bridges and highways, that shouldn’t matter.

As Chris explained in testimony to the Senate Finance Committee, these issues shouldn’t be handled by Washington.

One option would be to reduce spending and downsize the federal role in transportation. That approach would encourage state governments to pursue their own innovative solutions for highways and transit, such as new types of user charges, public-private partnerships, and privatization. Federal aid programs for highways and transit have many shortcomings. Aid redistributes transportation funds between the states in ways that are unfair and inefficient. Aid can get misallocated to low-value projects, and it distorts efficient decisionmaking by state and local governments. Also, federally funded projects are known for mismanagement and cost overruns.

Bingo. Chris is exactly right.

Which is why the right approach to transportation is to repeal the gas tax, not raise it.

As I argued in this debate with former Pennsylvania Governor Ed Rendell, we need to get Washington out of the business of determining state and local transportation issues.

P.S. Here’s an interesting example of “public choice” economics. Ask yourself why the CEO of a car company would endorse a big tax hike on gasoline. I give my answer in this discussion with Judge Napolitano.

P.P.S. Don’t forget that the politicians in Washington also are considering a tax on miles driven, so they’d be able to squeeze more money out of motorists even if they have fuel-efficient vehicles.

P.P.P.S. Just in case you’re tempted to acquiesce to more power and money for Washington, never forget the lesson of this poster.

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More than three years ago, I wrote that the Department of Transportation should be dismantled for the simple reason that we’ll get better roads at lower cost with the federalist approach of returning responsibility to state and local governments.

I echoed those sentiments in this CNBC interview.

Since there’s only an opportunity to exchange soundbites in these interviews, let me elaborate on some of the reasons why transportation should be a state and local responsibility.

1. Washington involvement is a recipe for pork and corruption. Lawmakers in Congress – including Republicans – get on the Transportation Committees precisely because they can buy votes and raise campaign cash by diverting taxpayer money to friends and cronies.

mitchells-first-theorem-of-government2. Washington involvement in transportation is just the tip of the iceberg. As I said in the interview, the federal budget is mostly a scam where endless streams of money are shifted back and forth in leaky buckets. This scam is great for insiders and bad news for taxpayers.

3. Washington involvement necessarily means another layer of costly bureaucracy. And this is not a trivial issues since the Department of Transportation is infamous for overpaid bureaucrats.

4. Washington involvement gives state and local politicians an excuse to duck responsibility for low-quality infrastructure. Why make adult decisions, after all, when you can shift the blame to DC for not providing enough handouts.

While I think I made some decent points in the interview, I should have addressed the assertion that our infrastructure is falling apart. My colleague at the Cato Institute, Chris Edwards, effectively dealt with this scare tactic in his recent Congressional testimony.

I also should have pointed out that a big chunk of the gas tax is diverted to boondoggle mass transit projects.

Last but not least, I’m disappointed that I failed to connect some very important dots. Gov. Rendell and the CNBC host both fretted that the current system isn’t producing a desirable outcome, but they’re the ones advocating for a continuation of the status quo! Heck, they want even more of the system that they admit doesn’t work.

Sigh.

P.S. While I obviously want to get rid of the Department of Transportation, it’s not at the top of my list for the most wasteful and counterproductive federal bureaucracy.

P.P.S. On a completely separate topic, I can’t resist sharing this Ramirez cartoon.

And since we’re making fun of our Statist-in-Chief, here’s some satire about the award Obama received from Steven Spielberg.

The teleprompters are a nice touch, reminiscent of some very amusing jokes here, here, here, and here.

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I’ve finally set up a youtube page for my TV interviews. Here’s my discussion with Judge Napolitano about crony capitalism, General Motors, and the bizarre case of a car company CEO endorsing an increase in the gas tax.

The most important point of the interview, at least I hope, is that companies get corrupted and housebroken when they receive handouts, subsidies, and bailouts. And since this is becoming more common, it means America is in danger of becoming another Argentina.

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