Streetsblog Capitol Hill

Oregon, true to its history as the first state to implement a gas tax, was also the first state to consider getting rid of it — in exchange for adopting a mileage-based system for highway funding. And the Beaver state isn’t alone: A number of other states have done studies and introduced legislation to charge drivers for the distance they travel instead of the gasoline they consume.

A new generation of fuel-efficient automobiles will compromise the gas tax as a method to fund infrastructure. Enter the VMT fee? Photo: Eco-Business Links

To date, none of the states have passed legislation to enact a vehicle miles traveled (VMT) fee. But with an increase in the federal gas tax seemingly impossible in an election year and federal funding increasingly uncertain, states may well be left with little alternative but to reconsider an idea many experts agree makes sense.

With Americans driving less and opting for more fuel-efficient cars, revenues from state gas taxes have been on the decline. Data from the Federal Highway Administration show that between 2007 and 2008, 30 of 50 states experienced declines in their gas tax receipts, dropping by an average of two percent. If electric cars one day replace America’s internal combustion fleet entirely, revenues based on gas taxes could dry up altogether.

For many states, VMT fees may be just what the doctor ordered. While the prospect of a mileage-based system has led some to argue that the GPS technology needed to make it work optimally is an invasion of privacy, there is a growing consensus that it is a much more sustainable option for transportation funding. Earlier this year, the Congressional Budget Office issued a report stating that the VMT fee system is a feasible transportation funding option and would result in a more efficient use of the highway system. This follows several earlier reports, including from two federal transportation financing commissions, recommending that the federal gas tax be gradually replaced with VMT fees [PDF].

In the past decade, about two dozen states have examined the feasibility of such a system. Here are some of the more noteworthy initiatives:

Oregon: Having learned valuable lessons from its original VMT pilot program in 2007, Oregon transportation officials redesigned the ways that vehicle mileage is recorded and fees are collected in a Phase II pilot program this year. Instead of a pay-at-the-pump concept, the state’s Road User Fee Task Force proposed legislation (HB 2328) based on an “open technology” platform applied only to drivers of electric and plug-in hybrid vehicles.

The original pilot program exposed design shortcomings and significant public opposition to the mandatory use of GPS technology to track vehicle miles traveled, so the new proposal would give Oregon’s DOT the flexibility to establish multiple methods for reporting VMT. An “opt-in” feature would allow drivers to choose the method by which they report their mileage and pay their fees. The revised concept also envisions a larger role for the private sector in the data collection and management of accounts.

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How can you convince Americans that transportation is important enough to invest in?

That’s the question that brought together five former U.S. Transportation Secretaries this week at the University of Virginia’s Miller Center.

Former DOT Chief James Burnley took a swipe at Transportation Enhancements and the stimulus.

James Burnley was deputy secretary and then secretary under President Reagan. He took the position that “75 percent” of the public “gives the thumbs down to paying more for transportation” because we’re giving them the wrong argument about why it matters. He took a jab at President Obama’s stimulus program:

We have to stop treating transportation infrastructure as a short-term jobs program. It didn’t work by any conventional definition of what “working” means. We all knew –those of us who have expertise in the field – it would not work in terms of short-term stimulus.

Because it takes time – it takes years for that money to actually be spent and people to be hired. We need to convince the American people that we need to invest in transportation infrastructure because we need to invest in transportation infrastructure. If we sell that idea – not as a jobs program, but because it affects the ability of our economy to grow over time, our international competitiveness and all the other things that we believe it affects, then we’ve got a fighting shot at convincing the American people that the resources that we believe ought to be devoted to transportation should be devoted to it.

That’s a legitimate point, and Streetsblog has made the same argument – that selling transportation as a jobs program undersells the true value of transportation. But there are a few problems with what Burnley is saying. First, when asked to tax themselves at the local or state level for transportation improvements, 75 percent of voters say yes. So maybe the case isn’t so hard to make after all.

And second, most Republicans – and many Democrats – fault the stimulus for not investing enough in infrastructure. Not quite seven percent of the package was devoted to infrastructure, and many critics say that’s why the stimulus didn’t do more to create jobs. Certainly, the president’s desire for “shovel-ready” projects may have been naïve, which Obama himself has publicly admitted. But Burnley may have been over-simplifying things with his statement.

Meanwhile, Sam Skinner, who served under President George H.W. Bush, argued that too many bridges to nowhere have eroded public confidence. And it’s not just transportation, he said – government mishandling of Medicare and pensions and everything else leads to overall distrust that the government can handle anything at all, despite the fact that the transportation department has proven that it “actually can complete projects under budget and on time.”

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At Rail~Volution yesterday, Rep. Earl Blumenauer (D-OR) — also known as the godfather of the “rail~volution” — said even he wouldn’t raise the gas tax right now.

Earl Blumenauer takes the podium at Rail~Volution, while moderator Grace Crunican of BART, APTA President Bill Millar, and Transportation Secretary Ray LaHood (not pictured) stand by. Photo by Clarence Eckerson, Jr.

“We should make some adjustments to a gas tax that hasn’t increased since 1993,” Blumenauer said. “Half the people think the gas tax goes up every year.”

He said he’d like to see it indexed to inflation:

In an ideal world, I would not raise the gas tax this year or next year. Come out of this recession, but put in place increases that are going to occur over the next 10 years; have that revenue stream. I would borrow against the revenue stream to take advantage of record low interest rates and a bidding climate like we’ve never seen, fund the president’s infrastructure bank to help move some of these forward, and work toward replacing the gas tax.

He reminded the audience that his state was the first to institute a gas tax, and now Oregon is working to get rid of it and replace it with a vehicle miles traveled fee.

Bill Millar, the outgoing president of the American Public Transit Association (“on Halloween, I turn into a pumpkin!”), said that before switching to a VMT fee, Congress needs to eliminate the federal guarantee, called “equity bonus,” that states will get back at least a certain percentage of what they pay in gas tax receipts. (The GAO recently found that every state actually gets back more than it puts in, thanks to infusions from the general fund, but that hasn’t stopped a lot of states from complaining that they don’t get their fair share.)

“States that encourage more travel get more money back [under the equity bonus system],” Millar said, “so we’ve got to break that cycle too, to make sure instead it’s an inverse relationship and states that give people more choice, more ways to travel, get more federal aid, not less federal aid.”

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Streetsblog had a chance today to ask the former Democratic chief of the House Transportation Committee, Rep. James Oberstar of Minnesota, about life since the 2010 election, when he lost by a hair to Republican Chip Cravaack. He said he’s spending his post-Congress time traveling to France, getting paid to say things he used to say for free, and telling his four kids and seven grandkids the story of his wife, who succombed to breast cancer 20 years ago.

We also asked him for his thoughts about some major themes in transportation today. 

Chairman Jim Oberstar calls transportation enhancements "the point of transformation" for transportation. Photo courtesy of Oberstar's office.

On the “dissipation” of high-speed rail funds:

We reshaped Amtrak in the 2008 authorization, designating 11 corridors and creating a mechanism by which there could be competition from private sources and from state consortia, with Amtrak, to provide the passenger rail service in a particular corridor.

At first, I didn’t like that idea, but I spent a lot of time talking to Mr. Mica about it and as we talked, I said, “You know, that’s beginning to make more sense. We ought to challenge Amtrak. That’s a good idea; let’s put this into the bill.” And then we got consensus that high-speed should be defined as 110 mph, and that was in the bill. And we got a bill that George Bush signed!

So there was a structure against which to pit [the $8.5 billion in stimulus dollars for high-speed rail]. I thought that was going to happen. Instead, it was all put up for competition for various states to come forward and put a proposal on the table.

Wisconsin, for example: to Madison, Milwaukee, Chicago. That should have been done as part of the Midwest High-Speed Rail Initiative, with Chicago as the hub, south to St. Louis, east through Detroit to Cleveland and eventually to Cincinnati, and west to Minneapolis-St. Paul. That would have been one very defensible, manageable anchor.

The Northeast Corridor could have been another important anchor. The west coast, which is already underway: a third anchor to this system. And then some other amounts in the other corridors, depending on proposals that they would have and should have submitted to DOT.

Allowing pieces to be bid or requested by states dissipated the critical mass of investment. And I’m not saying that in hindsight – that was my concern at the time.

On the attack on Transportation Enhancements in Congress:

Transportation Enhancements was the pivotal point of transformation at the end of the interstate era — an era in which travelers went where the road took them — to the era in which users of our system had a say in their quality of transportation and where that road should go in the future and how their transportation experience should be managed.

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House Transportation Committee Chair John Mica (R-FL) said this morning that getting permission from Republican leadership to find more revenues to fund the transportation bill was a “major breakthrough” but still won’t say where the money will come from.

Rep. John Mica won't be specific about where additional transportation funding could come from. Photo: 13 News

Mica told an audience at a Washington Post-sponsored forum on transportation that passing yet another extension of the surface transportation reauthorization persuaded leadership that there would not be consensus on a long-term bill until the spending levels were raised. “There wont be a gas tax increase,” Mica said, “but our leadership has asked us to look for other sources of revenue, and we’re on that mission now.”

“Speaker Boehner has really opened the door to us to look for any responsible means” to fund the bill, Mica said, adding that a gas tax increase is still off the table. “There’s also the possibility of doing away with it; adopting something else.” He wouldn’t specify what the replacement fee could be.

Nor would he say what he thinks of a Republican proposal to fund the bill with revenues from new oil drilling except to say, “We’re looking at it. We have some scoring issues. And then we have to make sure we have the votes.”

Mica said he was confident that a long-term bill would pass in March. “Don’t let anybody talk about a two-year transportation bill; that’s criminal,” he said. His counterpart in the Senate, Barbara Boxer, has proposed a two-year bill, but could be willing to go along with a longer-term bill if funding levels were raised.

Mica also reiterated his support for state infrastructure banks, saying he prefers them to a national bank. He said the way Washington works is: “the biggest gorillas get the most bananas.” Instead of having big guys compete for big loans from a big national bank, he said, “the best way to prioritize projects is to have them evolve from local level, get local and state participation, and then assist them.”

Transportation Secretary Ray LaHood also addressed the Washington Post gathering. He said he was confident that, despite current gridlock, there was enough pressure on Congress to create jobs that they’ll pass some form of transportation bill this year.

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President Obama has proposed a plan to pay for the American Jobs Act, the $447 billion bill to create 1.9 million jobs, including $50 billion for infrastructure. His “pay-for” plan includes limitations on itemized deductions for the wealthy and the elimination of some tax loopholes for oil and gas companies.

Republicans have never met a problem that couldn't be solved with a little more of this.

Republicans have a different idea, though: oil drilling. Several GOP representatives have introduced bills to expand fossil fuel extraction and use the proceeds to fund transportation infrastructure.

Somehow, whatever the problem is in Washington, Democrats want to solve it by raising taxes on the wealthy, and Republicans want to solve it with oil drilling.

When it comes to funding a quick jolt to the economy, it’s pretty clear that oil drilling won’t really cut it. “Any royalties from any new energy development wouldn’t start flowing to the Treasury for years,” said Erich Zimmermann of Taxpayers for Common Sense. “Essentially this would be like spending money now to be paid for with revenues that may or may not be realized at some future time. Sounds like a recipe for a doubling down on our current deficit mess.”

Some speculate that a GOP oil drilling plan would explain the recent news that House transportation leader John Mica, with permission from his party’s leadership, is looking to raise transportation funding levels by an extra $15 billion a year in his proposed six-year reauthorization bill. After all, they’ve said that raising the gas tax is off the table.

A plan to pay for transportation and infrastructure through oil drilling would erode the entire basis of the transportation funding system, which historically rests with the Highway Trust Fund, paid for with fuel taxes and a smattering of other fees on driving and vehicles. In fact, Congress requires that at least 90 percent of what the Highway Trust Fund spends must be generated from taxes “related to the purposes for which such outlays are or will be made.”

“Generating additional revenues from an increase in energy production, therefore, would likely violate this requirement and at the very least result in an override of the Budget Act,” Zimmermann said, “but would also call into some question the importance of the ‘user pays’ principle itself as it relates to paying for the transportation system.”

Whether or not Mica is planning on paying for his transportation bill with oil drilling is a matter of speculation at this point. But several other Republicans have already introduced bills to that effect.

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One nay-sayer argument against greater federal spending for transportation goes like this: “Too many faceless bureaucrats in Washington have too much control over how states spend their money. Let states raise their own revenues and spend them as they wish.”

Georgia Gov. Nathan Deal wants to freeze the state gas tax. Photo: The Beacon

Besides, they say, the national government is broke. There’s no more money to spend on roads and trains.

There are a hundred reasons why leaving transportation revenue collection and spending to the states is a bad idea. First, states are in a worse fiscal crisis right now than the feds – in part because they have a balanced-budget requirement, meaning they can’t overspend their revenues in lean times. Second, just because I don’t live in Kansas or West Virginia doesn’t mean I don’t have an interest in those states’ infrastructure, when so much of what I buy rides the roads and rails of those states to reach me. And I start to care a lot about the infrastructure of New Jersey when I travel to New York from Washington.

But here’s another reason: it’s not that much easier to gain public support for raising taxes at the state or local level than at the national level.

Georgia Governor Nathan Deal is asking state legislators to approve his state gas tax freeze – saving drivers 1.6 cents a gallon, but costing the state $30 million. New York legislators have also drunk the tax-holiday Kool-Aid, despite the fact that it would cost the state $19 million over just three weekends. Massachusetts Governor Deval Patrick is trying to raise the gas tax, and Sen. Scott Brown is giving him a hard time about it. A Connecticut state senator is going around getting petition signatures against raising the state gas tax. Gas station owners in Carson Valley, Nevada are running their own campaign to keep the county from raising the gas tax five cents — which would just bring it on par with the neighboring county.

There is evidence that when voters know exactly what the revenues will go toward – and it will benefit them – they support higher taxes. But that doesn’t mean raising taxes is ever easy — even if it’s just to replace a federal tax that used to be in place. Once a tax is gone, you can bet people will fight against re-implementation. For proof, just look at the fight brewing over merely extending the federal gas tax that’s been in place for decades.

Since the 112th Congress convened in January, the federal government almost shut down, the government almost defaulted on its debts, and the FAA was temporarily shuttered. It’s the Crisis Congress, thriving on the chaos of catastrophe. Next up: a bruising fight over funding the transportation system.

Grover Norquist wasn't content to just bring us to the brink of default. Photo by Gage Skidmore

A few weeks ago, Ben Smith at Politico mentioned in a short post that the gas tax was expiring September 30. If not extended, all but 4.3 cents of the 18.4-cent federal gas tax would disappear. Extending the gas tax has always been an easy, bipartisan move that happened more or less automatically. (Raising it to a reasonable level is another story entirely.)

When Smith first wrote about the gas tax expiration, it was the first some had heard of the issue. Others were monitoring it cautiously, just in case the Tea Party or other antitax crusaders decided to kick up a stir. But media reports confirm that those forces are preparing for battle.

House Transportation Committee Chair John Mica has proposed a bill based on the current gas tax, and his office has confirmed that he supports keeping it at 18.4 cents. But according to Platts news service, Republican members on key committees are “still deciding what to do about the federal gasoline tax.”

The demigod of the tax-haters, Grover Norquist, has decided to take up the banner, after enough news organizations asked if he was going to. “ATR will be urging people to look at ending the federal gas tax either cold turkey or phasing it out as soon as possible and allowing states to simply go raise their own taxes, rather than send the money to Washington and get it back with strings,” Norquist told Platts in an email.

Even other right-wing small-government types part company with Norquist there. Politico quotes Heritage Foundation and Reason Foundation experts as saying the gas tax “has to” be renewed and that a “cold turkey” end to the gas tax, as Norquist appears to be pondering, would be “chaotic.”

That seems to be fine by Rep. Joe Wilson (R-SC) of “You lie!” fame. (Chaos is sort of his thing.) His local TV network, WJBF, quotes Wilson as questioning the federal gas tax. “Sadly, it has been used in large cities to subside a transportation system, the subway systems of New York, Chicago, San Francisco. We need to look at this carefully. And, I believe the money should be spent where it is raised and that is by the drivers of Georgia and South Carolina.”

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The current gas tax is already too low to keep the Highway Trust Fund solvent -- what would happen if Congress lets the tax fall even farther? Source: Congressional Budget Office

Ben Smith of Politico mentioned a little tidbit that has eluded some of us: The federal gas tax expires September 30, at the same time as the current reauthorization extension. Most of it, anyway — 4.3 cents of the current 18.4-cent-per-gallon tax will stay.

The gas tax isn’t part of the reauthorization; it’s just a coincidence that the dates are the same. Regardless, it’s another thing to worry about on that day.

Smith cites an accountant’s memo which details exactly what’s expiring:

— All but 4.3 cents-per-gallon of the taxes on highway gasoline, diesel fuel, kerosene, and alternative fuels (Secs. 4041(a) and 4081(d)(1))
— Reduced rate of tax on partially exempt methanol or ethanol fuel (Sec. 4041(m))
— Tax on retail sale of heavy highway vehicles (Sec. 4051(c))
— Tax on heavy truck tires (Sec. 4071(d))
— Annual use tax on heavy highway vehicles (Sec. 4481(f))

“What could possibly go wrong?” tweets kclightrail.

No one on Capitol Hill is seriously suggesting an increase in the tax, and transportation advocates are just hoping no one targets it for a cut. So, while the expiration of the reauthorization is the subject of much fanfare, the impending expiration of the gas tax has mostly flown under the radar, and that’s just the way many advocates want it.

But the date is circled on the staff calendar over at Transportation for America. “In this political climate, who knows if Congress will suddenly decide to cut the gas tax?” said T4America’s Steve Davis.

Indeed, as advocates have pushed (to no avail) for a higher gas tax to fund the nation’s transportation needs, they may now find themselves having to defend the too-low tax we now have.

Transportation reformers around the country have long been disappointed at politicians’ unwillingness to raise the gas tax to pay for infrastructure. It seems, to many, an obvious and necessary solution for the chronic underfunding of our transportation system. Meanwhile, to the politicians, it is just as obvious that raising consumer taxes during a recession is a bad idea.

The Carnegie Endowment for International Peace has teamed up with a multi-partisan group to reform the way our transportation system collects revenues.

The Leadership Initiative on Transportation Solvency, a project of the Carnegie Endowment for International Peace, has come up with a solution.

The three principals of the Initiative – former senator (and presidential candidate and basketball star) Bill Bradley (a Democrat), former governor and DHS secretary Tom Ridge (a Republican), and former comptroller general David Walker (an Independent) – aren’t transportation experts, which Carnegie Endowment President Jessica Matthews says is an asset, since they have “no constituencies to serve.” Indeed, their interest is in creating a paradigm for “the type of fundamental review and reexamination that must be undertaken with every major government program and policy,” according to Walker. All three spoke at an event yesterday to launch the 125-page report, “Road to Recovery: Transforming America’s Transportation.”

A New Way to Raise Transportation Revenues

In addition to other reforms, the three are advocating a formula for increasing transportation revenues in a way that might be more politically and economically palatable.

First, they say, tax gas when the price is on the way down. That’s the way to make it less controversial. They’d like to see a variable gas tax of anywhere between zero and 43 cents per gallon. It would go up or down counter-cyclically based on oil prices, rising when oil prices diminish.

The problem, of course, is that oil prices aren’t expected to diminish. Sure, they were on their way down over the last few months (and then spiked again last week), but over the long term, as scarcity increases, so will prices. The Bradley/Ridge/Walker strategy, then, would leave us with a lower gas tax – and less ability to pay for infrastructure. Right?

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