Imagine if the government taxed you for food, then gave you the money back for groceries and told you what you had to buy and where you could buy it.
That’s what the government is doing to states with transportation spending, and the new 112th Congress should restore sanity by returning fuel taxation and highway spending to the states.
Congress levies taxes of 18 cents for gasoline and 24 cents for diesel, puts the revenue into the Highway Trust Fund, then returns it to the states to spend on transportation.
States in the Northeast, the Pacific Northwest, the Rocky Mountains, the Dakotas and Minnesota get back more than they pay. The Midwest, the South, California, Arizona and Texas are net donors, with Texas getting the least from the system.
The federal Highway Trust Fund was set up in 1956 so road users would pay for the interstate highway system. The tax then was 3 cents a gallon.
Congress contemplated that the highway system would be completed in 1972, and the fund terminated. But, as with many other “temporary” programs, it stayed.
The Highway Trust Fund is expected to bring in about $34 billion in 2011. Since it began, the government has collected $674 billion and spent $757 billion.
And the highway dollars it doles out come with expensive laws and regulations that raise the cost of transportation spending. States want to shop at Costco, but they’re forced to go to Whole Foods.
For example, states must have environmental permits, agree to certain speed limits and pay top dollar to construction workers because of wage laws set by the Labor Department. Plus, President Barack Obama signed an executive order requiring states to employ costly union labor.
Returning the Highway Trust Fund to the states could result in a decline in federal spending.
One alleged disadvantage is the possibility of disparate maintenance from state to state. Montana drivers might arrive at the Wyoming border and find their way slowed because Wyoming has skimped on maintenance. But that disadvantage already exists today, with some states spending more on maintenance than others.
Of greater consequence, the federal government might end the fuel tax for highways, and then reimpose it later for general revenues, as is the case in Europe.
Charging for roads and deciding where they should go should be the responsibility of state or private providers. It makes no sense for Congress to tax states’ gasoline purchases and give them back the money for highway spending.
The Highway Trust Fund and the federal fuel tax have outlived their usefulness, and the 112th Congress should wind them down.
Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.