As any responsible steward of income can probably state that any reduction in income must be met with a reduction in spending and likewise any increase in spending must be validated by an increase in available income, lest the reality of debt or re-appropriation of disposable funds becomes your only choice. The gas tax debacle that looms over our heads is an example of how this simple yet universal lesson in finance is often lost upon the government.
Due to its lack of popularity among both citizens and politicians alike, the federal gas tax which was progressively rising throughout the 20th century finally hit a wall in 1993 at $0.18, from which it hasn’t moved since. Curiously, the 1993 increase in the gas tax was not even fully utilized to improve the highway systems as 2.5 cents per gallon were dedicated towards paying down federal debt… As we’ll see later, states were not behind this trend of cross-funding. When coupled with inflation, this stagnation of the federal-gas tax and a simultaneous reduction in the amount of gas spent per mile — with the introduction of more fuel efficient cars — has effectively minimized revenues upon which the government was dependent to fully fund the Highway Trust Fund. However this simple lack of resources is not the only reason Congress is supporting bailing out the fund.
Spending priorities are determined more by politicians appeasing special interests than local needs or consumer choices. And the federal regulatory burden delays projects and smothers state and private-sector innovation.
― Emily J. Goff, a policy analyst at the Heritage Foundation
While the simple reality that solutions offered by the federal government will rarely not have an adverse effect on some Americans, what Goff describes is only the tip of the iceberg:
The beneficiaries of these local activities take from, but do not contribute to, the Highway Trust Fund. Better for New York and New Jersey to fund their subways, Oregon its bike paths and Maryland its trails.
What is the validity behind these assertions? Here are some numbers and figures for your consideration:
- New Jersey is currently allocating 95% ($516 million) of its gas tax revenue towards paying off the $1 billion it has in interest on debt
- New York currently uses 70% ($1.4 billion) of this revenue to pay off debt on past construction projects
- Oregon will have to spend over 35% of its gas tax revenue ($200 million) per year to fulfill interest payments on bonds purchased
- The state of Washington allocates 11.18 cents of tax revenue per gallon towards paying down its own debt payments
- There are even states like Texas, where 25% of the total state tax funds go towards funding completely unrelated endeavors, such as education
Given the magnitude of the fund’s present day debt, it becomes clear that these are not simply isolated incidents and hence, this not necessarily a problem that is unique to the federal government. The gas tax represents a failure of policymakers, not only the simple failure of neglecting to index taxes to inflation but the failure to create a non-regressive tax while exercising responsible stewardship over its revenues.
-Santiago Bello is a research associate at the National Center for Policy Analysis