D. Dowd Muska


Another Untrustworthy Federal Trust Fund

November 10, 2011

Can you afford a tax hike?

The U.S. Chamber of Commerce thinks you can. Along with pols from local and state governments, trade associations, and unions, the organization wants to raise the nation’s gasoline tax.

Americans for Transportation Mobility, Transportation for America, and Transportation Makes America Work! are careful to avoid the “t” word. Weaselly phrases, such as “modernizing our infrastructure and building healthy communities,” and “improved and increased federal investment in the nation’s aging and overburdened transportation system,” are substituted. But there’s little doubt that however vague the groups’ flacks craft their marketing, the real goal is a higher levy at the pump.

Mercifully, both ends of Pennsylvania Avenue have refused to go along -- intransigence that has the tax-hiking cabal mighty miffed. “You’d think that the courageous politicians would … do the right thing, but they’re not,” the CEO of the American Road & Transportation Builders Association grumbled to POLITICO. “They’ve got political cover. We’ve created cover all over the place -- they could blanket themselves from here to Los Angeles.”

But before the D.C. establishment gets too much praise for standing up for taxpayers, a bit of background is in order, as is a look at a promising method to halt Washington’s road-meddling altogether.

The Highway Trust Fund, established by Ike’s Federal-Aid Highway Act of 1956, built the Interstate Highway System. The network was completed decades ago, but rather than repeal the taxes imposed to raise the revenue for construction, fedpols decided to keep the spigots open. They now use the loot to buy votes back home.

Aside from the trifling issues that it should no longer exist, and is currently running a recession-induced deficit, there are two problems with the Highway Trust Fund: It treats states unfairly, and it’s not used for roads alone anymore.

While every state pays into the pot, contributions made seldom match disbursements received. Inequity is, and has been, commonplace. As the Heritage Foundation’s Ronald D. Utt summarized, “shortchanged states are typically those with above-average population growth whose transportation needs exceed those of the slower-growing states, which often receive shares greater than what they put in.”

Utt’s examination of the “return ratio” revealed that generally, the Highway Trust Fund treated blue states quite handsomely in 2009. For every buck sent to D.C. in highway taxes, Rhode Island got back $2.23. Connecticut ($1.25) was a “winner,” as were New York ($1.11) and Pennsylvania ($1.05). (Historically, Alaska and Hawaii have received the most largesse.)

“Loser” states are, quite understandably, displeased. In an op-ed for the Atlanta Journal-Constitution, Rep. Tom Graves expressed typical frustration: “Over fiscal 2005-09, Georgians lost $839 million of our gas-tax revenue, receiving back just 89 percent of what we put into the fund. The rest was doled out by the federal government for projects in other states.”

Regional inequality is compounded by user unfairness. Eighty-nine percent of the Highway Trust Fund is filled by excise taxes on gasoline and diesel. But motorists, whether they drive Harleys, hybrids, SUVs, or semis, don’t reap all the benefits of the fund’s expenditures. Utt noted that “only about 65 percent of federal surface transportation spending is used to support general-purpose roads, while the remaining 35 percent is diverted to high-cost, underutilized programs like trolley cars, covered bridges, hiking trails, earmarks, administrative overhead, streetscapes, flower planting, hiking and bicycle paths, museums, ‘transportation enhancements,’ tourist attractions, and archeology.”

So the Highway Trust Fund has outlived its original intent. It punishes some states while rewarding others. And increasingly, it is not about highways. No wonder that a handful of D.C.’s remaining advocates for fiscal sanity have proposed significant reforms. The State Highway Flexibility Act, Highway Fairness and Reform Act, and STATE Act offer intriguing options. (Sponsors of the three bills are Republicans, but tea partiers take note: The GOP has its share of pols who favor a gas-tax hike.) Transportation departments should be allowed to keep -- perhaps even reduce -- the tax revenue generated within their states’ borders, as well as eschew earmarks and escape the mandates imposed by micromanaging moonbats in Congress.

Devolution isn’t a perfect solution. State governments often exhibit wastefulness and corruption that would make Washingtonians blush. But with the laboratories of democracy required to balance their budgets, profligacy will be constrained. Also, experimentation will develop -- states could test the viability of replacing transportation-fuel levies with a high-tech, “vehicle miles traveled” tax.

The Highway Trust Fund is a fiasco. Why does the country’s leading “business” lobby want to reward it with more money?

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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