No Se Nada

Caught on Lehrer's blog, GM VP Bob Lutz tells the WSJ today that, "the best thing the (U.S.) government can do is to raise the gas tax by 10 or 15 cents a year until it reaches European levels."

This is a subject somewhat close to my heart because I spent a good deal of my time as a Senate staffer working on the mammoth six-year transportation bill (otherwise known [by me] as the Reelection Through Jobs Act of xxxx, where xxxx is a four-digit year in which the bill passed), and became unduly familiar with its purposes and innerworkings.

There's a great history on the gas tax from the Congressional Research Service here. Here's the deal in a nutshell: the federal gas tax, currently at 18.4¢ per gallon, funds all the infrastructure construction and maintenance of the federal highway system. It thus might be thought of as a user fee rather than a tax, since users of the highway system (all of us, in effect) pay for its upkeep on a per-usage basis. (Personally I'd like to see most taxes turn into some form of user fee, but that's a subject for different posts.)

Interestingly, it turns out that the 18.4¢/gal tax actually brings in far more money than needed just for maintenance and new construction, so plenty is left over for other programs well off the federal highway system (which is why I was negotiating things like "safe routes to schools" programs and railroad grade crossings on municipal roads in the last transportation bill).

Under current Congressional intent, what the gas tax decidedly is not is an incentive mechanism. In fact, many politicians have implicitly decided that the federal fuel tax acts as a disincentive to economic growth, to the point that recent sharp up upswings in pump prices led many to propose temporarily rescinding the tax. Their clear (and usually stated) position is that high pump prices stifle economic growth and thus low fuel prices are what are really good for America. See my criticism of this behavior here.

The words by Lutz are interesting to me for two reasons:

1- A private company (albeit one in an industry heavily regulated by the federal government) is asking the U.S. government to establish a mechanism that will affect the behavior of U.S. citizens and thus affect (essentially restricting) the types of products that company can bring to the market. Can you think of any other industry that does this? Most companies would like government to get the hell out of their business and leave them free to pursue whatever strategies they find most appropriate. For the most part, auto manufacturers feel the same way, fighting tooth and nail every time the feds institute a requirement for the latest safety device.

2- Since the federal gas tax already pays for the Highway Trust Fund (HTF) outright (i.e., from the standpoint of the FHWA we're not in a financial bind), if Congress did raise the federal fuel tax significantly, how would the extra money be spent? The answer depends on how Congress would philosophically approach the new tax.

____ A- If Congress decided that the new tax was in fact an incentive mechanism to get people to buy more efficient cars, Congress would then be declaring the savings of oil a major policy priority. In so doing, Congress would have to declare why oil savings was a policy priority, and here they would have two broad choices (in an "and/or" sense): 1) reduce dependence on foreign oil and prepare for the inevitability of peak oil; 2) help ameliorate climate change risk. Since Congress would be linking oil savings to these priorities, they might link the new revenue to programs that address these issues, which could very well mean taking money out of the HTF to pay for programs not linked in any way to surface transportation.

____ B- Congress could pass the increased tax as an incentive mechanism but decide not to link the new revenue to broader policy goals. They might decide that the new money has to stay within the HTF and pay for priorities within the surface transportation system. In this case the new revenue might be slated to address the dismal state of infrastructure in the U.S., an issue that Congress has been playing hot potato with. Alternatively Congress could pass the extra tax, tell everybody it is to encourage efficiency, and then promptly go spend the extra money on new highway construction. Seeing what I've seen of the process, I handicap this the most likely scenario.

The possibilities here are pregnant, and of course very unlikely to happen any time soon. Imagine it: Congress decides to link a tax-based incentive mechanism in a bill designed primarily to fund road construction, to a national priority of reducing our vulnerability risk to climate change. (In other words, use a bill explicitly designed to build new roads to get people to drive less, or at least more efficiently.) If that happens I expect the New Madrid fault to open again and swallow the entire town of Dyersburg, Tennessee.