Acute Pain at the Pump Stalls Gas Tax Revenue
Saturday, August 27, 2005
Record-high gas prices are reducing the amount of money available for Washington area transportation projects as leaders scramble to find ways to relieve the region's mounting traffic problems.
Highway projects are paid for primarily through a tax on every gallon of gas pumped. So as high prices compel some people to leave their SUVs and other vehicles in their garages and look for ways to cut back on the gas they use, less tax money is collected.
State officials said that effect is starting to be felt. In June and July, when prices started jumping and drivers started changing habits, total gas tax receipts dropped by nearly $1 million in Virginia compared with the same months last year.
The same was true in the District, where gas tax revenue dropped sharply in June, to a level nearly $1 million less than last year. June also was disappointing in Maryland, where taxes came in $1 million less than projected. Numbers for July from the District and Maryland were not yet available.
Maryland Transportation Secretary Robert L. Flanagan said he had no doubt the dip was brought on by high prices.
"There's no question that rising gasoline prices and flat revenues are a challenge," Flanagan said. "Maryland's economy is booming, and as a result, we expect to see more driving, not less driving. This does raise questions about our ability to rely on the gasoline tax."
Rising gas prices are the latest reminder to officials that the gas tax is no longer sufficient to finance transportation programs. "The gas tax is becoming almost inadequate as a principal source of highway funding," said Martin Wachs, a professor at the Institute of Transportation Studies at the University of California at Berkeley. Governments have "failed to increase the gas tax anywhere near what they need to maintain its spending power." Wachs noted that some localities are picking up the slack; 23 California counties have voted for sales taxes for transportation.
Gas and oil costs hurt transportation budgets in other ways, too. States must pay for fuel for their massive vehicle fleets, while construction prices have spiked because of contractors' transportation costs and because oil is a primary component of asphalt. Officials said the price of asphalt is up by nearly half, on top of already high prices for concrete, steel and other commodities.
As transportation departments "have to pay more to power their fleets and fill in tax revenues they're not getting, they're going to get caught in a terrible squeeze," said Lon Anderson, director of public and government affairs at AAA Mid-Atlantic. "Which either means taxes are going to have to be significantly increased, or they're going to cut back on projects.
"Given the reluctance to increase taxes, most likely they're going to get caught in a big squeeze and they're going to have to cut back."
This summer's high gas prices have accelerated efforts by transportation officials and lawmakers locally and across the nation to look for alternative ways to finance much-needed fixes.
Instead of relying on gas taxes to pay for infrastructure, leaders are increasingly talking about imposing tolls and partnering with private companies to build, maintain -- and profit from -- transportation projects.