The fuel tax debate

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There are no free lunches when it comes to infrastructure investment. You get what you pay for.” –Tom Donohue, president and CEO, U.S. Chamber of Commerce

You know things are getting interesting in the debate over how to pay for highway construction and improvements when Tom Donohue (at right)– the president and CEO of U.S. Chamber of Commerce – is calling for an INCREASE in U.S. fuel taxes.

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Both during his former stint as president and CEO of the American Trucking Associations (ATA) and now as the head of the biggest business lobbying group in the country, Donohue has long resisted tax increases on a variety of fronts for a variety of reasons. So his call for higher taxes to fuel infrastructure improvements is a big deal, from where I sit, because that means we’re probably in a deeper funding hole than we think.

“Congress and the Obama administration have a number of big challenges before them,” Donohue wrote in an opinion piece in mid-July. “But on one of the most important – investment in our nation's highways, bridges, and public transportation systems – there can be no delay. Unless we make a serious financial commitment now, our infrastructure will continue to crumble around us, threatening our safety, mobility, and global competitiveness.”

Donohue noted that, unlike cap-and-trade and health care reform legislation, reauthorization of federal surface transportation legislation is relatively uncomplicated and provides a proven bang for the buck. Disagreements, though, on how to pay for these badly needed improvements are delaying progress – and he believes the solution is a very simple one: you get what you pay for.

“Drivers provide the majority of the resources for federal road and transit programs when they pay taxes at the pump. This ‘user fee’ system has been in place since 1956 when Congress dedicated the gas tax to pay for construction of the Interstate Highway System,” Donohue explained. “The challenge is that gas tax revenues are not indexed to inflation and have not been increased in 16 years … and have declined while the need for repair, maintenance, and expansion is increasing.”

In his view – and that, of course, of the Chamber as a whole – the simplest, most straightforward way to raise money is through a modest increase in gasoline and diesel taxes. “The U.S. Chamber has never been accused of being a strong proponent of any kind of tax increases. But fuel taxes are different – they are user fees,” Donohue wrote.

Of course, Donohue noted some important caveats in his call for higher fuel taxes here. First, gas tax dollars must flow to projects that advance the national interest, not to wasteful earmarks or non-infrastructure projects. Second, lawmakers must cut the red tape that causes endless delays and raises project costs.

Finally, states and localities must be given the freedom to enter into public-private partnerships – an effort Donohue believes is worthwhile as he thinks as much as $180 billion in private capital is available to support infrastructure development. Now, me, I am not so sure about this tactic, for it raises the specter of toll roads popping up all over the place, creating more congestion and frustration for truckers and the average motorist alike.

Yet Donohue noted – and this I think is very true – that funding alternatives are limited, if nonexistent. Without increases to fuel taxes, you either reduce transportation funding – which he said would further hasten the deterioration of roads, bridges, and mass transit systems, plus cost jobs – or resort to deficit spending, which is a non-starter as we’re already swimming in an $11 trillion sea of red ink at the federal government level.

Even the ATA – the trucking industry’s biggest lobby – is backing higher fuel taxes, with Barbara Windsor – president and CEO for Hahn Transportation and a second vice chairman for the group – saying as much in Congressional testimony last week.

“ATA recognizes the need for additional revenues to support our nation’s highway and bridge infrastructure program,” she said. “ATA also strongly supports the continued reliance on the federal fuels tax – both diesel and gasoline – as the primary funding source for the Highway Trust Fund. Consequently, ATA will support an increase in those fuel taxes provided the revenues go to improving the ability to move the nation’s freight [because] ATA believes that the current highway program does not meet the needs of either passenger or commercial transportation.”

Needless to say, it’ll definitely be interesting to see how the fuel tax debate shapes us as the work on the massive highway bill continues.

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