For too many politicians, the solution to any problem is higher taxes. Beginning this week, Congress will begin a summer-long debate over the alleged need to raise the gas tax, to meet America’s infrastructure needs.
Former Republican Congressman, and Obama Transportation Secretary, Ray LaHood is testifying before the U.S. Senate Thursday, calling for hiking the federal gas tax and indexing it to inflation.
In LaHood’s outdated policy world, a gas tax hike should be as annual a ritual as a New Years Day hangover. Because LaHood’s plan would do nothing to reform the federal Highway Trust Fund, the government would just waste more of consumers’ hard earned dollars.
Big government advocates like LaHood argue that the gas tax must be raised because it hasn’t been increased in 20 years. Somewhere I missed this alleged law where taxes must be increased every so many years.
They also argue that, because cars get better gas mileage now, the existing gas tax doesn’t “go as far,” and so must increase to balance our greater fuel efficiency. Talk about no good deed going unpunished!
The gas tax isn’t the only thing that hasn’t changed in 20 years, though. The entire way we fund infrastructure improvements and the uneconomical mandates we put on road building also haven’t changed. Politicians should examine these, to make sure we are spending money as wisely as possible, before simply demanding more from our paychecks.
Currently, local and state governments collect the federal gas tax and send it to Washington. There, it goes through the political sausage grinder before being sent back to local and state governments to pay for infrastructure projects. This might have made some amount of sense when the federal government was constructing the interstate highway system. With that task largely complete, however, this system breeds waste and inefficiency.
It also suborns infrastructure needs to the political horse-trading that is too prevalent in Washington. Money is allocated based on political clout, rather than a clear assessment of needs. My home state, Illinois, ends up sending more money to Washington than it receives back.
Only in Washington does this kind of system make sense. It would make far more sense actually to cut the federal gas tax and allow local and state governments to tax, and spend, where the needs actually are.
Even when Washington allocates money for needed improvements, it also imposes costly mandates which drive up the cost of construction. The federal government requires that all construction uses “prevailing wages,” meaning that workers receive higher-than-the-market union-level wages, even if no unions perform the work.
On average, labor costs for federal infrastructure projects are 20-30 percent higher than they would otherwise be because of this mandate. Simply paying the going market rates for labor would allow government to stretch the construction dollar and build more with existing resources.
Routing infrastructure dollars through Washington results in another unfortunate consequence; money for roads is redirected for other uses. The federal Highway Trust Fund is, unsurprisingly, used to fund projects that have nothing to do with the nation’s roads and bridges. Around a quarter of Trust Fund monies are redirected to projects like mass transit, bike paths, nature walks and other superfluous activities.
Some of these projects may be worthwhile, but politicians should fund them through other means, rather than siphon off money intended to pay for roads. The alleged “shortfall” in highway funding could be filled simply by ending this redirection of funds.
The first solution to any perceived problem should not be higher taxes. America does have infrastructure in critical need of repair. Propping up a failed system with higher taxes is perhaps the worst policy prescription, however. We must reform the system first. Then, and only then, can we begin a discussion of how best to fund it.