Tuesday’s meeting between President Donald Trump and top Democrats from the Hill over the future of U.S. infrastructure investment didn’t produce any agreement — just the expectation that about $2 trillion in new spending is needed, at least according to the Democrats in attendance. But then, it wasn’t expected to accomplish as much as it did. The White House released a statement calling the meeting “excellent and productive” and the two sides have agreed to talk again. That’s great, but Speaker Nancy Pelosi and her fellow Democrats expect a public revenue source, not just the tax incentives to spur private investment that President Trump has offered in the past. Will tax-averse Republicans go along?
As it happens, there is a possible compromise out there, and it’s a strategy that members of both parties have embraced in the past. It is neither anti-business nor does it ignore the threat posed by climate change. It may not end up being as massive as Democrats and the president would like, but it would go a long way to at least addressing the nation’s deteriorating roads, bridges and public transit infrastructure. And, perhaps best of all, it’s a policy with a proven track record that has, for short-sighted political reasons, been neglected by Congress for the last quarter-century.
The answer? Defrost the federal excise tax on motor fuel, which is now frozen at 1993 levels. To put it simply, the federal government has been trying to finance its Highway Trust Fund, the portion of the federal budget set aside specifically for surface transportation, by charging motorists 18.4 cents for every gallon of gas and 24.5 cents for every gallon of diesel fuel purchased. That made sense in 1993 when the average price of a gallon of unleaded was $1.11. It makes absolutely no sense when prices are nearly three times that amount and, to make matters oddly worse, vehicles are much more fuel efficient and thus their use contributes less toward the roads they use.
Don’t take our word for it. Listen to business groups like the U.S. Chamber of Commerce (not exactly a leftist organization), which has called on the tax to be more than doubled. Or the American Trucking Associations which would be happy to see its members pay $100 more in fuel taxes each year. That’s because the tax isn’t a tax so much as a user fee — a set-aside within the federal budget that finances the roads motorists use (or, alternatively, helps finance the public transit that relieves congestion on those roads). Federal support for that program has simply not kept up with the needs. And users like truckers see the costly impact of that neglect — traffic delays and damaging pot holes that raise vehicle maintenance costs by billions of dollars.
It’s one thing to offer deep-pocketed private investors a chance to build or expand toll facilities, but that can’t be the answer to every transportation challenge. Just look at what local governments are doing now. Even states with some of the lowest gas taxes in the country — New Mexico and Arizona among them — charge more per gallon in motor fuel tax than the federal government. The highest, neighboring Pennsylvania, now charges 58.7 cents per gallon. The impact on the economy? Negligible. As of March, Pennsylvania’s unemployment rate was 3.9 percent while Arizona and New Mexico were at 5.0 and 5.1 percent, respectively. Even Pennsylvania’s fuel prices are little different from the rest of the country. According to AAA, Pennsylvania gas prices average at $3.05 per gallon while the nationwide price is $2.88.
Is this a perfect solution? Not hardly. There are other infrastructure problems — water and sewer, the electric grid, schools, broadband and housing — that this wouldn’t cover. It’s also not a permanent fix even if Congress made it inflation sensitive given the transition toward electric vehicles and fuel efficient cars. But it’s the simplest and most logical alternative available and one that Republicans and Democrats alike have supported as pro-growth and pro-business for much of the last half-century. And it has the added benefit of raising fuel prices (yes, we call that a benefit) as it moves the nation toward greater fuel efficiency and less air pollution, while creating incentives to ride mass transit and promoting other cost-effective and green policies.