The answer may surprise you. No, it’s not the income tax. And it’s not the payroll tax. It’s the federal gasoline tax (see figure). The federal penalty for driving in 1980 was a tax of 4 cents a gallon. But the tax climbed by 5 cents a gallon under Reagan in 1982; by another 5 cents a gallon under George Bush in 1989; and most recently by an additional 4.3 cents a gallon under Bill Clinton in 1993.
For those who are counting, that’s a steep four-and-a-half-fold increase in 16 years. When state and local gas levies are included, motorists in many states now pay 40 to 50 cents a gallon. It’s hard to say where all the money has gone. Clearly, the nation’s roads aren’t four and a half times better today than they were 15 years ago. In fact, it seems that there are more watermelon-sized potholes nowadays than ever.
Republicans should now do what they didn’t do two years ago — repeal all, or at least most, of Bill Clinton’s gas tax hike.
The gas tax was originally intended to be a “user fee” — a quasi-toll for using roads, bridges and highways. But for more than a decade the federal highway trust fund has been accumulating billions more from the tax than has been spent on roads. In fact, the revenues from Bill Clinton’s 1993 gas tax hike were explicitly dedicated to reducing the deficit, not fixing roads.
Earlier this year Republicans adopted a sensible policy that required all gas tax dollars to be spent on roads, not other government programs. That well-intentioned policy inadvertently created a whole new set of problems. It turns out that the care and maintenance of the highway system don’t require anything like an 18.4 cent gas tax. After all, in the 1950s and 1960s we built the interstate highway system with a maximum federal gasoline tax of just 4 cents a gallon. Maintenance of those roads shouldn’t cost 18 cents a gallon.
When Congress decided to pour billions of dollars of new funds into the highway trust fund this year, the 73-member House Transportation Committee acted as if it had won the Virginia, Maryland and Pennsylvania jackpot lotteries all in one day. And just as any lottery winner would do, the committee wasted no time embarking on a bipartisan shopping binge.
The controversial transportation bill was supposed to have a five-year spending ceiling of $147.5 billion. Instead, the House Transportation Committee, flush with its new booty, ballooned that figure to $182 billion — some $30 billion above what even Bill Clinton requested. A Republican Congress is now poised to enact the most expensive public works legislation in American history. The bill is far more financially reckless than anything Robert Byrd or his fellow Democratic appropriators ever dreamed of. It is crammed with hundreds of pork-barrel funding projects. Highway money is to be used for a $30 million moving sidewalk in Committee Chairman Bud Shuster’s home town of Altoona, PA, a $741,000 pub in San Francisco and other such absurdities. Shuster seems to be on a mission to pave over every blade of grass in North America.
The bill is, in short, a fiscal catastrophe — and an embarrassment to a GOP supposedly committed to returning Washington to financial sanity. Ten years ago Reagan vetoed a highway bill much less irresponsible than this. Newt Gingrich and Dick Armey have told Mr. Shuster as much. Committee members, however, defend their profligacy by noting that they are merely spending trust fund dollars that are supposed to be dedicated to building roads.
What is clear from this feud is that as long as the gas tax money gushes into Bud Shuster’s coffers, he will spend every last dime of it. There is only one way to prevent this binge: cut the gas tax. A sensible plan would be to immediately chop the federal gas tax by 2.5 to 5 cents a gallon. That would leave enough money to fund a hugely expensive highway bill. It would also allow Republicans to repeal a tax hike that not a single one of them voted for in the first place.
This plan would put $3 billion to $5 billion a year back into the pockets of American motorists. Best of all, the tax cut would not raise the deficit by a single penny–because the money would otherwise build parking garages, pubs, bike paths and Bud Shuster memorial highways.
A nickel cut in the gas tax is simple and fair. It would give us all a tax cut without mucking up the tax code. The gasoline tax is one of the most regressive of all federal taxes. Even most of America’s poor own a car and pay at the pump.
Motorists need this money more than Bud Shuster does.