TCS Daily

Why Bush Is Right to Resist Raising the Gas Tax

By Ted Balaker - November 15, 2006 12:00 AM

To many, George W. Bush is a dimwit who stands in the way of progress. Take the gas tax. Many smart people want to raise it. Even former Fed Chairman Alan Greenspan, a man of the right whose every utterance commands the world's attention, recently added himself to the list. But W. folds his arms and refuses to budge. It may look like obstinence, but this time the cowboy president may be on to something.

Many hope that higher gas taxes will curb American's appetite for driving. If we drove less, we'd pollute less and wouldn't have to worry as much about global warming.

A recent New York Times piece by Daniel Gross was typical. Gross pointed out that Europeans endure much higher gas taxes than we do. In the U.S. the state and federal gas taxes amounts to about 40 cents per gallon, compared to nearly $4 in Italy, France, and Germany. He also noted that the last time the federal government raised the gas tax was way back in 1993.

Then the surprising news: more right-leaning economists are saying it's time for a raise. It's not just Greenspan, but others like former Bush administration economists Andrew Samwick and Greg Mankiw, as well as prominent libertarian Tyler Cowen. It sure seems like a bipartisan consensus is emerging, one that makes Bush look like the Lone Star State loner.

Still, that doesn't mean he's wrong.

If there is a consensus among experts, it's for road pricing. A recent paper published in Econ Journal Watch found that economists overwhelmingly support pricing and tolls.

Suppose the price of bread were zero. At the grocery store you'd see a line going around the block. Just like in the old Soviet economy. Well, imagine if the price of highway access were zero—actually you don't have to imagine. Just look at the highway at rush-hour.

Our reliance on gas taxes means that drivers pay for roads when they're at the gas station, not when they're actually using them. The result is traffic congestion. And that congestion frustrates the environmental goals of those who support higher gas taxes. The Texas Transportation Institute estimates that each year idling cars burn 2.3 billion gallons of gas. That gas isn't taking someone to work or to a doctor's appointment, it's just wasted.

If our system were toll-based instead, motorists would pay for roads only when they actually used them. They would think more carefully before piling on the road at rush hour. Tolling, especially the kind of variable tolling used on the 91 Express Lanes, does more than give motorists speedy and predictable trips, it's also easier on the environment than stop-and-go traffic.

But if we boosted the gas tax we'd pump more money into a system in which decisions are based more on political pull than environmental concerns or motorists' needs. Just a couple decades ago, the federal highway bill was nearly pork-free. But the last one contained 6,000 earmarks amounting to about $25 billion. Raise the gas tax and we'll surely fund more bridges to nowhere and pork is just the beginning. More than a quarter of every gas tax dollar funds something other than highways and even much of the money that does go to roadwork is burnt up by bureaucracy. A former federal highway administrator reckons that federal regulations increase project costs by 30 percent.

And sky-high gas taxes havn't reduced driving as much as one might expect. Joel Schwartz points out that in Europe driving accounts for 78 percent of travel, only about 10 percent less than the U.S. And the Euros are gaining on us. Over there per capita driving has been increasing more than twice as fast as in the states. Higher gas taxes haven't spared them from pollution or traffic congestion either. In both cases, Europeans have it worse than Americans.

Economists also say that the gas tax will help the government's fiscal mess. Perhaps, but the fiscal mess can also be alleviated by turning highway facilities into revenue sources. Tolling for scarce highway capacity is good economics and good public finance.

Yet transitioning to tolls gets harder as gas taxes get higher. At $4.24 per gallon, Britain has Europe's highest gas tax. It's made tolling a tougher sell as Brits demand to know why they should pay more when they already pay so much. American reformers may regard tolling as even more of a political long-shot than raising the gas tax, but there are signs that motorists are warming to tolls. Users of High Occupancy Toll (HOT) lanes in Southern California and Minneapolis give them high marks and folks in places like Atlanta, California, Denver, and Washington, D.C. tell survey-takers that they prefer tolls to taxes.

When he opposes an increase in the gas tax is Bush being courageous or pig-headed? Who knows? Whatever his reasons he's making it easier to escape from an old system that doesn't work.

Reason Foundation's Ted Balaker is co-author of The Road More Traveled: Why The Congestion Crisis Matters More Than You Think, And What We Can Do About It (Rowman & Littlefield 2006).



Why Bush Is Right to Resist Raising the Gas Tax
A good example is right here in California, the legislature has basically stolen the State Gas Tax to balance the budget for the last 5 years with no end in sight. Any increases will more than likely go to some bloated government program.

UK gas taxes
They say that if somebody gave them free oil in the UK it would still be expensive at the pump because of those ridiculously high gas taxes. But it's a cash cow for their predatory government, just like taxes on booze and tobacoo. But for the States I have a really novel suggestion; they just have the very same value added tax, GST, or VAT, as every other item has, and other than that the govmnt has nothing to do with it; no dept of energy, no subsidies, no nothing. And toll roads are easy nowadays. Some places have a little stored value card in a little box on the dashboard, and it subtracts from it as you drive along. So if no driving, no taxes, but if your spoilt brats can't walk or bike to school, then just pay and don't complain so much.

Re: UK gas taxes
I'd rather pay a tax of known value at the pump, than a tax of unknown value every time I jump in my car.

Furthermore, the concept of road-pricing goes hand-in-hand with other 'government' plans to monitor how and where we drive. Did you do 8mph over the speed limit last time you drove somewhere? Expect a fine in the post. Was a crime committed somewhere in the general area that you drove past last Friday? Expect a police knock at the door etc.

unkown tax?
Why unkown? People know how much it is to drive on the NY state thruway don't they? And some countries have the price listed on a big overhead gantry crane, and you can exit if you don't want to pay. But maybe your life is very interesting if the governmt wants to know that you're driving to work, or Homedepot, the supermarket, kids to the soccer game, etc.

recover the subsidy
Governments spend so much money building roads, why not recover come of that through tolls?

But that's no excuse for lowering the gas tax. It would be hard to set it high enough to recover the externalities: global warming, trade deficit, political instability in the middle east and Nigeria (including 50% of the Iraq operation), ...

Re: unknown tax?
There is talk, at least in the UK, of national road pricing. That is to say, every road you drive down will have a price. A busy road at rush hour, in theory, will cost maybe ten times more than at, say, midnight. A residential road may cost more than a main road.

That implies, to my mind, two things:
First, such a system would require an organisation to know all your car movements (and just think what would happen if your car got stolen...).

Second, you wouldn't necessarily know how much each journey was going to cost - get held up anywhere for any reason and you might be paying ten times as much as you'd budgeted for.

Regardless of how mundane my (or your) life really is, we should all have a broad right to privacy - it's not really anyone's business but ours where we go, provided our activities are lawful.

All IMO, of course. Over to you!

Since when is Mankiw right-leaning??
and while we're at it, I don't think Cowen is that libertarian...

Gas taxes and the price of goods
I did not see many comments herein on the price of goods in these other countries due to the higher gas taxes. Since this was the concern in the USA. I see many items of real high cost in Europe when I was there just last month.

Asking for higher gas taxes is just like having a higher inflation as the price of goods that are trucked from farms to supermarkets, ports to warehouses and stores, and the cost of petroleum products would have to rise in similar costs.

So then we all need raises to offset the cost of food and goods, besides gas. And how is this better?

The grass on my lawn is free but I do not see poeple lining up for blocks waiting to take it. The water flowing out of the facet is too but I don't see anyone abusing it as well.

Not sure the point is an excuse for higher taxes, not to help reduce polution. To reduce polution offer tax incentives and cheaper costs for this technology which is not the case now. To buy a hybrid car, why does it cost 4 grand more? I have to drive the car for 7 years to break even. Where is my incentive?

At least gas and water companies provide some type of incentive and low rate plans to buy the new heater or ac.

The dems seem to operate quite the opposite.

Political problem with tolling
"Toll road" is still a bad word, even in California. The issue was a tie for first most important (illegal immigrants being the other, go figure) in the South OC Supervisor's race this election. (1) People are used to freeways and see it as a government function. (2) With the Prop 98 stanglehold on the state budget, whether it's gas taxes or tolls, the schools are going to get a cut and any effort to change that is seen as screwing the public schools.

Ted, does anyone collect and/or publish data comparing travel times on the 91 Express Lanes versus the 91 free lanes, especially during rush hour? And what percentage in the free lanes is thru traffic? One could figure some dollar amount at rush hour that the free-riders' time isn't worth to them, and I would suspect it's shockingly low and shockingly lower when you consider wasted gas.

A practical first step I'd like to see in road pricing is setting up temporary, automated toll lanes at peak traffic times on existing freeways. If you've got 5 lanes backed up 5 miles at 5pm (i.e. the 405), take 2 of those lanes, cordon them off for thru traffic, set up an overhead scanner and camera, and make them toll lanes from 4pm to 7pm. Adjust the hours and lanes every few months or seasonally to encourage off-peak usage by the motorists who won't pay the tolls. If we can put a man on the moon, we can surely do that. Hah!

increased taxes will do little, perhaps nothing, good
Who pays the price for increased federal taxes? Farmers, the rural poor (who don't have public transportation to rely on) those in the transportation industry and all of us through the higher cost of food and consumer good of all kinds.

Those who don't have to drive to get to work, those with more money than brains, much of the urban middle class, etc. will hardly know the difference. They might *****, but they will continue to drive their 5 mpg hot rod or their 12 mpg SUV. I highly doubt that even a $4 a gallon raise in taxes would translate to a 10% decline in overall transportation mileage and subsequent polution and consumption.

And, if it did, most people wouln't like the result.

If It's a Gas Tax vs. a Toll Tax, Raising the Gas Tax is the Right Move
What's the difference between paying at the pump and paying at a toll booth?

In either case, the more you drive, the more you pay.

Tolls are simply another -- very bad -- form of tax.
1. It's double taxation. Tollroad drivers don't get a rebate on the gas tax. When driving on a toll road they get to pay both the gas tax and the toll tax.

2 It's a tax that costs far more to collect and administer. The Maryland Transportation Administtation's annual report -- like those of every toolroad agency I've examined -- shows that the costs of collecting tolls and general administration is more than half the toll revenue received.

3. It's a tax on driver's time. Whether or not a driver uses "EZPass" type devices, he's going to sit in stalled traffic waiting to get to the toll booth. This costs not only time -- but also money in the form of wasted fuel.

4. It generates pollution. All those cars sitting at New Jersey Turnpike tollbooths, or at the Port Authority tool booths for getting into Manhattan, contribute mightily to the pollution in that region.

If tollroads are a bad idea for motorists, who benefits from them?

1. Politicians, who can create lots of patronage jobs, in some cases getting down to the toll collectors themselves.

2. Politicians who get high-paid admin jobs with the tollroad authority after they lose office (or, in some cases, are "moved aside to make room for a fresh face").

3. Politicians who get campaign contributions from suppliers to the toll road.

4. The people who make and sell toll collection equipment.

5. Foreign investors who get to buy a toll road and then jack up the tolls, as is happending in Indiana.

Raising the gas tax is the fairest way to finance road construction and maintenance. Those who drive more, pay more. They who drive gas guzzlers, pay more.

You're wrong on all points.
The tolling that Balaker generally advocates is to relieve congestion, i.e. peak crowds on highways. The textbook example of a privately built and administered toll road is the center lanes of the 91 freeway between Orange and Riverside counties in SoCal. In this example, you're wrong on all 4 points, especially 3 and 4. My bet is that drivers who do not use the 91 toll lanes during peak traffic are greatly underestimating the value of their time, in addition to wasting fuel sitting in a 5 lane parking lot.

Additionally, on your point (2) the public toll roads (241 and 73) in Orange County have been jacking up the manual tolls and reducing the hours when attendants are available to collect them. There is a strong incentive for even casual toll road users to set up a FasTrak account.

But you're definitely right that the politics get very thick when it comes to toll roads vs. free roads. Even good Republicans don't like the idea of using the price system to regulate peak usage of roads.

Population density is a lot higher in Europe
So it's not surprising that they use less gas than we do.

It's possible to design a system that record your every movement.
Examine how prepaid cell phones work.

Global warming, is a positive externality
They should be paying us to drive.

The middle east has always been unstable, oil has nothing to do with it.

rising commodity prices do not cause inflation
The money spent on increased gas prices, is not spent on something else. Due to supply and demand, the price of those other things go down. Some things go up, some things go down. No net inflation.

Inflation is caused by too many dollars chasing too few goods. That is the only cause of inflation.

gas taxes
Gas and diesel that is used for off road purposes is not taxed.

EzPass is usually a seperate lane
So the drivers don't have to wait in line with those paying the toll.

As to those sitting in line waiting to pay a toll, why do you think that they are polluting more than the cars in stop and go traffic on regular roads.

If they are spending the same amount of time waiting in traffic, why pay extra to travel on a toll road?

EzPass is usually a seperate lane
Mark, You're right.

EZPass is usually a separate lane (or lanes). But to get to those lanes, at least where I've been, one still has to get through backed up traffic to get to the EZPass lanes. So one still wastes time and money paying the toll.

Are local roads better? It depends. One can avoid waiting to get onto the NJ Turnpike from Delaware by taking I-295 just after crossing into NJ. Traffic moves as quickly there as on the NJ Turnpike. Local roads actually move faster than the NJ Turnpike at Exit 8A, where the Turnpike narrows to 2 lanes from, I believe, six.

Maybe in California they have a better system. But up and down the East Coast, toll roads are sources of congestion, especially at the toll booths. Connecticut recognized this several years ago, when it took the tollbooths off I-95. Traffic moved faster and more smoothly. Accidents were down. And traffic on local roads was reduced.

So far my money, if necessary, raise the gas tax to build additional free roads. (It may be true that some politicians raid the gas tax funds for other things, but that's also true for tollroads, at least in New Jersey.)

it's more predictable
In places where there have such, it's more predicatable. For example, rush hour times might cost more, so maybe you can drive earlier or later, or take a bicycle. City centres might cost more, say between 9am and 5pm, or like London always high and I just read that the mayor, Red Ken, wants to raise it(but not for his car presumably, because he's different). The stored value card system is computerized to subtract, they don't usually care if you're going to a church meeting, or to visit your mistress. So overall, such modern systems can help aleviate traffic. It would be better yet though if parents would just make their spoilt rotten brats make their own way around instead of driving them.

Re: it's more predictable
Well, I simply disagree, although not with all of your post.

If I know the price of a gallon or litre of fuel, then I know how much a journey will cost and there will be no surprises when I get home.

I really don't want to work out the differential costs of going one way versus another, not to mention the frustration of finding out how much it might cost to drive down a particular road in a different town or city.

Maybe we're thinking about different journeys? I walked to school on my own from the age of five and I go to work by train (three of them, in fact). So, I tend to think in terms of longer journeys. You're maybe talking about shorter-range, but regular journeys.

Where I do certainly agree with you is the last comment: parents should get their fat kids off their fat backsides and on their way to school on their own, etcetera. On the few times that I have driven during rush hour I've noticed a big difference when the schools are on holiday - suddenly, the roads are considerably clearer....

good point
But that only covers the farmers. BTW, they have to make long trips to town for groceries; longer trips to other towns for parts and equipment (since all the implement manufactureres have reduced their dealer numbers to hub stores in larger towns). Get caught on a county dirt road with dyed diesel in your vehicle and the penalty is just as severe as if you are on the interstate. An increase in taxes may not increase the costs of the diesel used to run their tractors and combines, but they can't used tax-free diesel in any of their other vehicles (grain trucks, service vehicles, etc.). The increase in fuel expenses will still hurt a lot.

exactly right
Travel distances are also much lower in most cases (unless you are traveling all across Europe). We had a friend from France who was amazed that we not only would travel 120 miles one-way to go to a high school football game, but that we also remained in the same state while doing it. When we made the 600 mile round trip to the State Tournament he was flabergasted.

Gas And Diesel Tax
I have yet to find a place that will sell me gas for my boat with no tax and diesel has $.05 more in fed road taxes on it than gasoline. If all the fed and state road tax monies that are collected were spent on roads including bridges and overpasses, there would not be a problem. Our lawmakers use these funds for pet projects or in the case of California social programs and wonder why the roads are in such disrepair. California just passed a massive bond for infrastructure that will not be paid off by the time that the roads and bridges have worn out.

Don't forget Bridges to Nowhere

Once when in Atlanta, we were hosting some customers from Germany. Since they were staying the weekend they wanted to do some site seeing. They asked us how many hours it would take them to drive to some city in Texas. They were flabbergasted when they found out it was more than a day's drive each way. They thought that it would just be a couple of hours at most.

And this is why what makes sense in a lot of the world
doesn't work in the U.S., Canada, and a few other areas of the world. A long haul trucker in Spain sledom has to stay the night at his destination, and would be amazed at a three or four day trip; one way!

I could agree with a small increase, if it was all guaranteed to go to road projects. I think toll roads should be illegal, especially if any part is built with state or federal funds. But that is because I hate the delays and pain in the rear.

no need delay
Some places have no delay because they have a stored value card on the dashboard and it subtracts automatically, from a kind of gantry crane overhead as you enter and exit different areas. Modern tech works for that.

For those interested in toll roads, might I suggest a look into the new transportation system.

Texas has already contracted with various foreign corporations to build their portion of the system.

Great for the guy that uses that road all the time
But I have never been able to find one of these cards in a 7-11 store and, when you are on a cross country trip, who wants to get off the highways to go buy one to use twice and then have to buy another. Yes, they cause major delays one way or another and are a pain in the a ss.

road warrior
You've never been to a place where they use it; check out singpoare sometime. Wait a minute, I've got a better idea, check out what traffic is like in Bangkok, Manila, and Jakarta, then you will see what it really looks like where they let cars dominate without any attempts to get modern.

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