Wednesday, December 05, 2007

The Distorting Effect of Gas Taxes columnist David Stromurges the elimination of the federal gas tax. For every gallon of gas you pump into your car's tank, you pay 18.4 cents to the federal government. Obstensibly, this gas tax is funneled into a "transportation fund" which is then used to fund the development of transportation projects across the country. That is how it is supposed to work, but that practice ended on the day the federal gas tax went into effect.

The a "transportation fund" is as much an illusion as teh "Social Security Trust Fund," it simply doesn't exist. The gas tax has become a source for pork barrel spending.
In the latest transportation bill over 6000 earmarks diverted billions of dollars away from investments in basic infrastructure to the preferred projects of powerful Congressmen.


And what do these earmarks fund? Nature trails, bike paths, welcome centers, and other such “pork-barrel” spending. One earmark even funded a program to make the Minneapolis-St. Paul airport more bicycle friendly! Is this how Federal gas tax dollars should be used?
I can't imagine riding my bike to the airport nor can I imagine anyone else doing it, so that one seemed to be a waste of money.

Strom suggests ending the federal gas tax because it distorts the effort to find an optimal solution for moving goods and people through our country.
But earmarks are not the only or even the worst result of Federal involvement in transportation decision-making. Federal dollars also come with strings attached, which effectively force states to divert resources away from pressing transportation needs. Without huge infusions of Federal matching funds it would have been unthinkable to sink hundreds of millions of dollars into underperforming rail transit systems, for instance.


Current transportation planning comes from the top down. It is driven by politics, bureaucratic infighting, and the whims of policymakers and planners.

Instead, transportation policy and planning should be driven by one overriding goal: increasing the mobility of goods, services, and people with the maximum of efficiency using the scarce resources at our disposal. Markets, not planners and politicians, are best suited to achieving this goal.
A basic economic principle is that a market, shaped by the ebb and flow of pricing and scarcity, will find a balance unachievable by top-down planning. While our country touts the benefits of a capitalist society, we still look at too many things form a socialist standpoint, including transportation. Just because Congress and the states have the power to do something does not necessarily mean they are the best agency to accomplish that task, in fact they are usually the poorest service provider since there is no profit motive, that is a motive to make the most cost effective and cost efficient use of scarce resources.

I am not advocating for a system of privately owned toll roads, or even public toll roads, but like Strom, I would like to see more public input in the transportation process. At this point, there are two solutions, one governmental and one procedural.

First, the government, which derives its power from the governed (that is us), needs to be much more responsive, which means having some mechanism for ensuring some turnover in the appropriations committees both in Congress and the state legislatures. That means terms limits on those committees, so that senior members of that committee are not left sitting in their chairs too long diverting funds into useless projects.

Second, at least on the state level, multiyear transportation plans should be posited to the public at large via referendum. Say a three year transportation plan, with projects funded at a certain level based upon revenues and other factors would be approved by the voters in a referendum. That puts the power back into the hands of the people, who as a large group, would be better, by collective wisdom, at putting scarce resources to their best use.

Just an idea.