A Gas Tax Hike Is The Wrong Way To Fund Highways

Various reports suggest that policymakers—including President Trump himself—are considering raising the federal gas tax, by as much as 25 cents per gallon. Supporters argue that a hike is necessary to replenish the Highway Trust Fund, and—for those concerned about climate change—some also argue that a higher gas tax is needed to encourage drivers to switch to electric vehicles or mass transit.

These arguments are incorrect, even on their own terms. A gas tax is in principle a very blunt instrument for funding highway usage. And in terms of the political optics, imposing a huge new regressive tax on drivers would justify the critics of the recent income tax reform plan, who claimed that Republicans wanted to help the rich at the expense of the poor.

Ironically, if President Trump would just stick to his privately led infrastructure plan, then all of these problems would go away. The nation could get investment into those roads and bridges that genuinely need attention, while market prices would guide decisions and reduce traffic congestion. Road construction would be paid by users, the same way we pay for hotel construction. Smoother traffic flows would relieve stress and also cut way back on carbon dioxide emissions. As usual, the way to solve the problems in infrastructure is through less government intervention, not more.

Gas Tax, a Blunt Instrument

For some reason, people have adopted the notion that a gas tax directly attaches a fee to a driver’s “highway usage.” But that’s not true at all. Some people drive on highways very often, while other drivers remain on local roads. Yet the federal gasoline tax hits them equally.

Furthermore, when we’re trying to allocate the costs of highway construction fairly, the real issue is the wear and tear associated with a vehicle, not how many gallons of gasoline it burns. For example, an electric car causes a comparable amount of damage to a highway as a similarly-sized vehicle using conventional fuel, but the federal gas tax would implicitly charge only the latter driver for his usage.