Raise the gasoline tax?
In the comments to my earlier post, “Dewhurst hits bottom,” referring to the light gov’s op-ed piece in today’s American Statesman, I wrote about what I would have done to close the budget deficit. One of my recommendations would be to raise the gasoline tax, index it to inflation, and issue bonds on the revenue.
This suggestion generated a response from the TxDOT camp. It is worth a discussion:
Paul, you really believe raising the gas tax and indexing to inflation will provide any additional funding?
It would need to be raised to about $1.50 per gallon immediately to fund current transportation projects and then raised very frequently. With the current TX population boom, projects will increase, and so will the need for funds. Eventually (soon), folks would stop paying $4 or $5 per gallon (carpool, public transit, etc.), and then the tax would be raised even more to account for lost revenue.
This is not to mention the additional dollars per gallon the gas tax would need to be raised to deal with more fuel-efficient vehicles that offset revenue (and they’re getting more MPG all the time).
Relying on the gas tax is not an option. It would very quickly be raised so high that goods will stop moving across Texas, businesses will relocate to cheaper gas tax states, and our economy would quickly collapse.
I completely disagree that the gasoline tax has lost its viability as a source of revenue for building highways.
If we raised the tax by 50% (ten cents per gallon), and dedicated all the new revenue to roads (no diversions), it would raise about an extra $1.4 billion. That may not sound like a lot, but it would more than double the available baseline funding — and if you index to inflation and add bonding ability, the ability to build roads grows accordingly.
I find it incredible that TxDOT and its supporters are still clinging to Ric Williamson’s projection that the gasoline tax would have to be raised to $1.50 per gallon. Nonsense. TxDOT couldn’t spend that kind of money if you drove up a Brinks truck and handed it to them. The $2.4B could clear up a lot of urban congestion: Loop 1604 in San Antonio, which needs a third lane going both directions; Highway 290 east out of Austin (probably tolled); U.S. 67 out of the Metroplex toward Cleburne; and these would be free roads. And that’s this year. Next year there another $2.4B would be on the way.
It is true that fuel efficient cars have reduced the revenue raising capacity of the gasoline tax. But that doesn’t mean that the tax is no longer viable, or that it has to be raised to $1.50 to get anything done, or that if you increase the gas tax our economy would collapse. Nobody believes that stuff any more. TxDOT has cried wolf too often.
I think that the prospects are decent for the Legislature to raise the gasoline tax next session. Dan Patrick, for example, has said that he would support a statewide increase (although he opposes a local-option gas tax). This is something that can get done, with a little leadership. Unfortunately, that’s something we haven’t had much of.
Tagged: david dewhurst, gas tax, txdot.
Anonymous says:
Look at the data objectively. Texas gas tax revenues are on decline, despite the state’s growing population. Last year is was down 2% last year, after it was projected to go up. Fuel efficiency is a contributor, so are higher prices which drive consumers to make lifestyle choices: drive less, carpool, mass transit.
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paulburka says:
So what? Just because the revenue is declining doesn’t mean that it can’t be increased; indeed, the fact that revenue is declining suggests that it should be increased. (Texas’s tax is lower than that of most states.) But TxDOT doesn’t want more gasoline tax money. It wants to be able to do concessions and toll roads.
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Anonymous Reply:
October 21st, 2009 at 7:29 pm
The states gas tax revenue started to decline when prices went up and you think raising the tax automatically means more money. That defies basic economic theory. Consumers change behavior at some price point and we’ve already see it happen.
But let’s look at the bigger picture the entire federal transportation system and 59 states have predicated their road infrastructure on the gas tax. And now all 50 states and the federal government are hurting. The gas tax isn’t the long term solution, and when it comes to transportation our only hope is long term solutions.
What’s the old saying, if you keep on doing what you’ve always done you’re going to get the same result. It’s time for a coherent transportation long range transportation policy that values results over process, innovation over the “same ole same ole” mentality, recognizes the advances of technology and responds to it, and the need for multimodal solutions.
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Anonymous Reply:
October 21st, 2009 at 7:45 pm
Sorry, meant 50 states, not 59…. Obviously.
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Spirit of Buck Travis says:
Anybody ever hear about a thing called inflation? As a kid, I can remember a stamp costing three cents and gasoline was about 19 cents a gallon. Everything costs more now. The important thing to remember is “‘Do I have to have one of those or two of those?”
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Anonymous says:
Did I hear correctly that Dan Patrick is now for raising the gas tax? When he ran on his Patrick Pact with Texas, he said: “5. Legislators should put tax cuts before their own pension increases.” Last time I checked, legislators still have their pensions, and Dan Patrick hasn’t done anything to cut or repeal them. I guess now that he is a legisaltor, he likes than pension and wants to raise taxes so he’ll have more money to spend.
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Anonymous Reply:
October 21st, 2009 at 5:10 pm
i’m sorry, dan patrick likes the state pension? huh?
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Michael Quinn Sullivan says:
As our organization and many others said throughout the Session, let’s end the diversions, bring much-needed transparency/accountability to all the transportation agencies (state and regional), and then see how much more is needed to fund priorities.
The anecdotal evidence of waste is abundant, but absent better, public data it seems imprudent to toss more dollars into a system that isn’t able to spend it properly.
An honest gas-tax increase should be on the table, but at the end of the line. Tolls and/or private equity financing should also be on the table; just because one believes they haven’t been done right before doesn’t mean they are not viable policy options. Private equity built every fortune in the U.S. and important components of transportation (airplanes, rail, and trucks, and the fuel that powers each); surely it can be leveraged to build a road!
A patch-work approach (the LOTA effort) to dealing with the very real transportation challenges won’t improve the situation. Indeed, the locals that were bemoaning of the defeat of their local option taxes are the same people who put local option sales taxes to less important uses, then complain they don’t have enough transportation financing.
To your recommendation: the Texas Constitution mandates that at least 25% of all state gas tax receipts be dedicated to public education. Make sure that’s part of your revenue/spending calculations… Unless you are suggesting this simple gas tax increase be part of a separate constitutional amendment — which may not be so simple!
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back up a minute says:
well, Paul…I don’t work for TxDOT…never have, but I stand by that comment
an increase in the gas tax will immediately and considerably devastate the economy. folks who pay for increased gas prices will have less money to spend on goods and services. that’s a decrease in commerce, but it’s miniscule compared to the loss the Texas economy would see as a result of goods in transit. Texas is an exporting giant–all the good stuff we hear about the state business climate can be quickly voided by any significant variable that could increase overhead for businesses (ie moving goods at a higher price).
50 cents a gallon? i would suggest reading some literature from the aforementioned TTI or the Federal Highway Administration. That sort of revenue might get you enough dough to build a skateboard ramp, but Texas is HUGE. Texas has a huge number of people. we need roads–with an “s”…not just one.
if you got the legislature to raise it 50cents/gallon, this would not even cover the costs of maintenance for current roadways…forget even beginning to fund new road construction
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el_longhorn Reply:
October 21st, 2009 at 6:20 pm
A 10 cent a gallon increase will devastate the economy? Give me a break. Oil prices fluctuate that much every week and the economy hums along. A 10 cent a gallon increase (a couple billion) would go virtually unnoticed in Texas trillion dollar economy.
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Anonymous says:
Paul, you are correct about the potential additional revenue that lies within the gas tax, especially if bonded appropriately, but I also agree with TxDOT that the gas tax increase alone will not solve the problem. There have to be additional innovative financing approaches to bring flexibility into long-term planning and to attract additional investment. This does not mean concessions, it means smart approaches to attracting capital, either by leveraging bonding authority, creating public private partnerships that are genuine and long-term planning.
Why TxDOT has sold out to the concession model is beyond me. It is the worst approach to building a toll road, it costs more and the profit incentive guarantees the worst taxpayer return and the highest tollpayer fees.
I hope the gas tax makes a comeback, that it is dedicated but i mostly hope that somehow there is a change at TxDOT within their finance department and their ill-named Innovative Project Development department. Until new ideas and an open mind is allowed…we’re destined to more of the same — waste and no relief in sight.
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State Senator John Carona says:
Look, folks. Paul Burka is right on this one. As Chairman of the Senate Committee on Transportation and Homeland Security, I can attest that the only near-term answer to the transportation funding dilemma we are facing is to raise and index the gas tax. Stopping the diversion of gas tax revenues for other legislative purposes, as is long overdue, will not alone solve the problem.
Calls from naysayers indicating that the tax would have to be raised to $1.50/gal are ill-informed. The Governor’s Business Council, a blue ribbon panel of Perry invitees, told the Legislature over three years ago that the shortage of roadway dollars (estimated then at $60-90 billion dollars, depending upon whomever you believe) could be corrected by a modest (ten cents per gallon) gas tax increase, indexed to annual inflation in highway construction costs, and then bonded against. Those who speak otherwise share misinformation and are sending us into a massive network of privately-operated toll roads which will cost the average driver exponentially more than simply raising the gas tax.
The motor fuels (gas) tax is a credible source of transportation funding for at least the next 20 years. Based upon careful study, it is by far the most fiscally conservative way to build our Texas roads. The persons who most often criticize it are politicians doing their level best to avoid any sort of “tax increase” on their political record. Where, fellow drivers, is the statesmanship in that?
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Brisoce Democrat says:
Burka, I think Dewhurst is positioning himself for the Governor’s Mansion in 2014 regardless what happens in 2010.
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not a state senator says:
first, let me take a cheap shot at Sen. Carona. Where, Senator, is the statesmanship in holding the transportation bill hostage-basically holding your breath like a toddler until you get your way, despite almost unanimous opposition to the local-option-tax-increase?
back to your contentions, which I disagree with. yes, an immediate gas tax increase would fund a little bit of maintenance (and maybe a little bit of construction for new roads). would it provide more dollars than private investment? absolutely not.
publicly-funded roads will always be started and completed later than public-private partnerships, which have companies risking capital on a guaranteed return–they’re eager to start and eager to see the return. private funding is not subject to such a drastic loss in capital due to fuel economy. private investment IS subject to construction cost inflation but not subject to the highly volatile indexing of the fuel tax.
it’s the time-honored debate: does the government build things faster and better…or does the tradesman risking his capital and reputation build things faster and better?
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BigDuck Reply:
October 23rd, 2009 at 2:08 am
At 18 miles per gallon, it costs me about two cents a mile to drive on a gas tax supported highway. In my smaller car, it’s about one cent per mile.
The new toll road near me costs $ .22 per mile. And I’m still paying the gas tax when I drive on the toll road.
I’d sure rather pay a little more gas tax than build more toll roads.
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WUSRPH says:
Don’t forget that it would take a constitutional amendment to allow ALL the income from an increase in the gasoline tax to go to transportation. The constitution splits motor fuel tax revenues between roads and public schools with the schools guranteed 25% of the take. There is no way you could get a two-thirds vote in both houses of the Leg. to approve the necessary amendment. I also question whether the voters would approve it even if you did.
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Rumble Strip says:
Oh please. If you’re going to dismiss the $1.50 from the deceased Ric Williamson then you need to dismiss that absurd TTI-Governor’s Business Council (GBC) study that was written by another dead guy, Michael Stevens. I doubt anyone on here has read the whole thing through but it was embraced rather quickly by Mr. Burka and anyone else who wanted to bash Williamson for pointing out the obvious: this ain’t gonna be easy.
The TTI-GBC-Steven’s study was just silly. Truthfully, your tax dollars underwrote researchers to justify everything Michael Stevens had lobbied for in the past. Paid for with a Congressional earmark, overseen by Michael Steven’s personal research lobbyist, based on amateurish projections of fuel efficiency, it dumped at least 50% of the costs onto local governments without coming clean about that (which raised that $60-90 billion figure way up but no one seemed to cover that part), and it was designed to raise the tax statewide and only allow the money to be spent in metropolitan areas.
Yep. Amarillo pays for Houston under the Stevens plan. It just floors me how none of that ever came out when everyone who could used it to beat up Ric Williamson. (“Hmm—it looks heavy enough to smack someone with, so it must be a good report. Let’s go hit someone with it. Really hard and over and over again. This is fun. Let’s do it in front of the media, too. Hurry, call a hearing!”)
Raising the gas tax and bonding against it isn’t a bad idea, but it sells the whole discussion short to advocate only that and then to promote it based on a report that no one really understood. Read the report all the way through and then try to defend it. It’s hard to do. Or just do what everyone else did: take a few sentences out of it and claim you found a solution.
And was it a solution? Hmmm, is a solution a solution if it isn’t passed by the Legislature? Why no it isn’t.
Love him or hate him, Ric Williamson got more solutions through the Legislature than anyone else in recent history. Now success is measured by how many of them they can take away. Destroy everything and then complain when no one runs to embrace your one single beautiful idea. Yeah, that’s statesmanship.
The problem with this debate is that some of the loudest people in the room cling to one solution and dismiss all others. Regressive fuel taxes, oppressive tolling, evil public-private partnerships, brutal registrations fees, and perhaps even intrusive vehicle miles travelled taxation will all be needed. It’s best to start laying that groundwork now.
One of the deeper thinkers on this is Eliot Shapleigh who, much to the transportation community’s chagrin is leaving the debate. He commissioned a study, performed by Dye Management, on the options and you can read it here: ftp://ftp.dot.state.tx.us/pub/txdot-info/library/reports/gov/needs/needs_study_summary.pdf Go to page 8 (Table 4) for a list that’s insanely easy to comprehend. In spite of being discussed in numerous hearings it never received any attention because you couldn’t beat someone else up with it.
Actually, don’t bother reading it. It isn’t loud or shrill enough. I mean, what fun is that?
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Anonymous Reply:
October 21st, 2009 at 11:48 pm
Rumble strip is your real name Kris Heckmann or Coby Chase? You are the only two people on the planet that would argue this.
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Rumble Strip Reply:
October 22nd, 2009 at 6:02 am
That’s pretty funny, but no.
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TE says:
Yeah, raise it, (gas tax), to whatever percentage ya want; just lower my PTxs the same percentage! Do you know I pay now, (not a lot by many standards) a whopping $1.17 on school taxes? Kinda weird, but before bringing it to a vote, (was $1.04), the appraisal district raised it to the $1.17? This seems illegal; but what’s new with Texas politics?
We could use a little quid-pro-quo.
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Texian Politico says:
This new font type is too small and harder to read than the previous style. Please change it back.
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rc3po says:
Has anyone thought about the Electric Car the Hydogen Car, the others that are hidden and being tested and developed as we speak. I had 4 cars and sold each and every one in protest to the Gas Frenzy that I was told by my Stock Broker that was coming and I should jump on it now. You then add more to an already Burdened Economy and come up with Raising the GasO Tax. Remember your in Texas where we already Paid for all you say you need more money for. Whoever purposely Designed these Roads and those who misapropriated funds to created these Hardships thought all would be Gulible to saying Yes to footing the Bill To Even More Expenditures, You’re Out
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