The federal gasoline tax doesn’t bring in enough money to meet the country’s transportation spending needs. What’s more gasoline taxes are a good way of raising tax revenue—they’re economically efficient and environmentally beneficial. But of course nobody in politics wants to touch the idea of higher gasoline taxes. So it seems noteworthy that Transportation Secretary Ray LaHood was talking about the idea yesterday:
To index the federal fuel tax [to inflation], that’s something Congress is going to have to decide. As we get into the reauthorization bill, the debate will be how we fund all the things we want to do. You can raise a lot of money with tolling. Another means of funding can be the infrastructural bank. You can sell bonds and set aside money for big projects, multi-billion-dollar projects. Another way is [charging motorists for] vehicle miles traveled. The idea of indexing the taxes that are collected at the gas pump is something I believe Congress will debate. When the gas tax was raised in 1992 or 1993, in the Clinton administration, there was a big debate whether it should be indexed. At that time, they thought there’d be a sufficient amount of money collected. Now we know that isn’t the case. That is one way to keep up with the decline in driving, and more fuel-efficient cars.
Elena Schor notes that, in fact, “construction inflation has increased at a rate twice as high [PDF] as the Consumer Price Index” so even this wouldn’t fully meet funding needs over the long-term. Still, it would be a very sensible adjustment to current policy and certainly something I expect Evan Bayh to be championing as chairman of his Very Serious Everything on the Table Deficit Commission.
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