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Why we need to raise the gas tax — and then get rid of it

Fuel prices are posted at a Road Ranger gas station in Princeton, Ill., on Tuesday. (Daniel Acker/Bloomberg)

The federal Highway Trust Fund, which helps pay for transportation projects all over the country — non-highways included — now looks as if it will run out of money in August. That timeline sets up another last-minute, high-stakes confrontation in Washington over how to replenish an essential program that supports construction jobs, local economies and basic repairs. Here's the money graph from the Department of Transportation that looks at the trust fund's highway account (mass transit has its own account within the fund):

We've been careening toward this moment since about 1993, when Congress last raised the gas tax that provides the fund's revenue. For a variety of reasons, though — Congress' inaction is a big one — today's 18.4-cent-per-gallon tax does a terrible job of covering our transportation needs. Now the fund needs a short-term patch, a sustainable solution for the next several years and then probably a radically different approach to funding.

Nine-term Rep. Earl Blumenauer (D-Ore.), who sits on both the House budget and ways and means committees, has been advocating for all three. He introduced a bill in December to raise the gas tax by 15 cents (that's less than a plan currently on the table). But his long-term vision — shared by many transportation wonks — looks dramatically different: "I am working very hard for Oregon, which gave you the first gas tax, to pioneer getting rid of it," he told me.

I sat down with him recently to talk about why people hate the gas tax so much, what Congress is likely to do about it this summer and how we might fund transportation in entirely new ways in the future. Below is an edited transcription of our conversation. As you read it, be sure to picture Blumenauer in a bow tie.

Why has the gas tax been such a uniquely difficult thing to deal with? Congress has tackled any number of big problems in the last 21 years. But repeatedly, this has not been one of them. Why is that?

For the first 80 or so years of the fund, the receipts increased because the American population grew, and we were driving more and more and more and more. It started running into trouble in the last 20 years for two reasons: One is that gasoline is the only product that we price in real time. The typical American sees the price of gasoline about five to 20 times a day, if they pay attention at all.

You don’t see changes in the price of bread, or milk, in the same way. This is in your face. And over the course of the last 30 years, particularly over the last 10, gasoline prices have been extraordinarily volatile. Oil prices even more so. This triggered some resentment or anger. The combination of the volatility of the pricing, and the fact that it’s in your face made people resistant. It’s not a favorite tax.

And it wasn’t necessary until recently to talk about increasing it because it did have a natural growth.

Now we have seen several things come into play: The growth in vehicle miles traveled has actually declined for nine consecutive years. The increase in fuel efficiency has been pretty dramatic. And then we’ve got highway construction costs that have not been declining. As a result of the combination of inflation, fuel efficiency and changing driving patterns, we’ve got a Highway Trust Fund that is in a tailspin. According to the AAA, the average motorist is paying half per mile of what they paid in 1993 to use the roads.

That implies that the gas tax no longer functions as what it used to — as a user fee.

We have to make a transition into something that is use-based. The gas tax used to be a very good approximation for road use. And that relationship between road use and the gas tax has been shattered.

With greater fuel efficiency, hybrids, plug-in hybrids, electric cars, hyper-efficient diesel, people who are putting the same amount of wear and tear on roads and occupying space and creating congestion have wildly different payments that they make through the fuel tax.

Last December, you introduced a bill modeled off a Simpson-Bowles recommendation that would increase the gas tax 15 cents, over three years, and then index it to inflation. But part of your proposal included expanding a pilot program Oregon has been running for the last decade to replace the gas tax altogether with a "vehicle miles traveled" tax that functions much more like a user fee — a tax motorists would pay based on how many miles they actually drive, not how much gas they consume. Can you explain how Oregon's pilot works?

We started in Oregon with a monitoring process. People are interested, it’s technically possible, and it changes driving behavior. When people were aware that they were being charged per mile – and they were aware of the miles that they drove – they drove less.

But one of the elements that came out of the first pilot study was that people were a little uncomfortable with monitoring where they went. It’s ironic that people are self-conscious about that, because with a smartphone, The Man knows where they are. These are people who are tweeting and posting pictures. And we are transforming automobiles into computers on wheels that are keeping track of this stuff anyway. In the second variation [of the pilot], we gave people a choice, because we really don’t care where they go. We care how far they go. So people could choose – they could do it with an app for a smartphone, they could use an on-board navigation system. They could do it the old-fashioned way when they go for an annual inspection and just have an odometer reading. Or you could pay a big fat, flat fee.

When people were given those choices, it really smoothed things out, and it let them tailor it to what they wanted. What we’ve proposed is that this pilot project be extended to every state on a voluntary basis.

According to GM and Verizon, the technology is there to make this transition. It could be done in months. They’re ready to go. The public’s not yet ready to go. So we need to have a fuel tax increase to be able to have a robust six-year reauthorization, and we need another year or two or three of experimenting, raising the comfort level, giving people choices.

The other thing that is so powerful about the VMT technology is that we’ll be able to help drivers do a lot more than just conveniently pay for their road use. The same technological platform will enable people to get real-time traffic information. The seamless payment that’s debited to an account to pay for road use could also be used to pay for a transit ticket, or an Amtrak ticket, or an application they can use to pay for parking.

Many of these apps already exist.

It’d be an integrated system. It’s very likely that this would be an on-board navigation system. The car companies are salivating at the prospect of doing this. There are people who would pay to be a part of it.

Do you think the VMT fee would be more palatable to drivers if it were integrated with all of these other applications that have nothing to do with paying taxes?

If all we did was set this up to collect the road fee, that’s actually a more expensive way to collect the fee. The gas tax is actually a very inexpensive tax to collect. But if we are able to have a platform that does all these other things, to share the costs, and give people a richer transportation experience, I think people will voluntarily make that transition.

So, some of the costs of collecting the tax through a piece of technology in your car would be born by private industry wanting to get in on that platform?

There would be a miniscule charge for Metro to be a part of this. It would be built into the financing arrangements and the architecture: They get the benefit, they help pay a little bit of the burden, so it becomes cost-effective.

And this is only near-fetched. Virtually all of this technology is available now. This is an opportunity for us to dramatically improve the transportation experience. You can use this to plan your trips, avoid wrecks, get there just in time to catch the train or get your parking spot. We’ll get a lot more efficiency out of the existing infrastructure. We don’t have to pave over the world, build a lot more parking lots, more transit lines, more lane miles if we are able to use them more efficiently.

This is all long-term. But there’s a separate issue about what’s going to happen in the next three months as the Highway Trust Fund approaches insolvency. How do you think this plays out this summer?

It’s important we avoid the summer shutdown, because they’re draining the Highway Trust Fund, and it isn’t even enough to get to the end of the year. You can’t take it down to zero and manage all these contracts around the country. They’re going to have to keep several billion in the fund. We need a short-term $7-8-9 billion to get us through the end of the year. It would be ill-advised to extend it into next year.

The short-term solution?

Yes. If it goes into next year, who knows what happens. The Senate will be very narrowly balanced. We will be in the middle, or maybe the final stages of a presidential campaign, with half the people in the Senate running for president. People will be focused on tea party primaries; they’ll be focused on the issue du jour. Infrastructure is important, but it rarely captures the headlines unless something falls apart. So it’s important to get us through the summer shutdown, and then, from my vantage point, the long-term solution needs to be robust, sustainable and dedicated.

Ideally, we will have some time after the election. I don’t think we’ll get much more air time before the election because of the way this place works. We’ll have an opportunity to play this out, for people to look at the alternatives. There are other suggestions people have made. [Rep.] Peter DeFazio wants a barrel tax [on oil].

I applaud Chris Murphy and Bob Corker on the Senate side for talking about the need to raise the gas tax, but tying it with tax extenders – how does that work exactly? There’s not consensus on all of the tax extenders, and they run the risk of making it look like, 'Okay, the majority of the public is going to pay more, so one-half of one percent gets tax relief.' That may be an optical problem. And it’s an unnecessary complication. But let it play out.

This is a conversation we need to have. We have not had a single hearing in Ways and Means since my Republicans friends took over on transportation finance. We have not had a single opportunity for the truckers and AAA and the U.S. Chamber and the ALF-CIO and the environmentalists to come in and talk about the pros and cons, what they need, what they’re willing to do, to hear from the governors, the mayors. That’s very, very important. I hope it happens.

What happens come September if there’s not at least a short-term solution?

Long before September, contracts just don’t get issued. There’s no new construction, and current obligations are dialed back.

There are some who say, 'Well, it’s time for the federal government to just get out of transportation. Abolish the gas tax, and let people do whatever they want.' Let’s see how far that goes. What has made American infrastructure so powerful in our history is that we had a national program for railroad construction, we had a national program for the interstate freeway system, we had a national program to strengthen and integrate transit.

I don’t think it’s sustainable politically that something does not happen before the election. Six weeks before the election, these contracts are canceled, and we’re making it clear there will be no new construction for at least a year? That’s a great way to spring into a general election and to guarantee that this is going to be a political issue and put people on the spot. ‘What have you been doing for eight years, people?’ It’s not going to happen.

When you mention no new contracts, existing contracts will be dialed back, what will that look like to me as a driver driving around in my community?

You’re not going to see much. But people who will see it are the folks who are dealing with highway construction, with transit operations, people who are trying to plan for the future in our metropolitan areas large and small. It pinches in the construction sector, where we are just now getting a recovery. That’s a huge source of family-wage jobs. For people who have a vision for the future, it drive them crazy. It’s not a pretty sight.