The federal taxes on fuel in the United States currently stand at 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel. The average combined state and federal taxes across the country is 27.2 cents per gallon of gasoline. With gas prices above $3 per gallon in almost all areas of the country congress should immediately move to eliminate all federal gas taxes and eliminate federal funding for road projects.
Gas taxes were intended as a "user fee" in this country to fund the Federal Highway Trust Fund. The idea behind this tax is the more you drive the more you pay in taxes that fund road projects. Although the concept seems like a good idea in theory, in reality the funds are being wasted and raided for other projects. Just as the Social Security Trust fund is simply an old shoe box full of IOU's at this point, the Highway Trust Fund is also broke. In 2008 the fund required an $8 billion infusion of money from the government's General Fund.
There are variety of factors contributing to shortfalls in the Federal Highway Trust Fund, but the majority of the fund's budget is grants and payments to state road and transportation projects. According to the Cato Institute, the average federal grant covers 75-90% of the cost of a project. The problem is, like most government programs, there is little oversight and lots of mismanagement in these construction projects. States provide a very small portion of the required funding for a project and are therefore very unlikely to be concerned about cost overruns or delays.
Like most "user fees," federal gas tax revenue depends on a variety of factors including how much we drive, how much fuel our cars burn, and the overall economy. The current recession has led to a sharp decrease in the number of miles driven, gasoline sold, and taxes collected compared to five or ten years ago. Although many road projects are planned years in advance the government has no solid method of predicted trust fund revenues in the future.
As much as we like to believe that cars and trucks are evil pollution generating devices, the fact is our economy requires driving in order to function. I don't care how "green" of a life you live, I guarantee those green products you are using were shipped by road and fuel-consuming trucks.
The question remains: "How do we fund road projects if the Federal Government is no longer providing funds or collecting taxes to pay for the projects?" The answer is very simple. Allow states to determined the appropriate tax rate on a gallon of gas based on the transportation needs and priorities of that state.
Many people may not realize that the 18.4 cent federal tax they pay in Virginia may only contribute 2 cents to local road projects while sending 16.4 cents to a pet mass transit project in Seattle, Washington. Giving power to the states to decide which projects should be a priority and how to fund those projects creates accountability. A cost overrun or delay in finishing a project becomes unacceptable to voters and politicians at a state and local level when they are paying the bill rather than big money-bags - Uncle Sam.
Accountability is key to any successful project in the private sector or in government. Eliminating federal gas taxes and federal highway funding would serve many purposes:
1. Immediately reduce the cost of gasoline for consumers.
2. Stimulate economic activity by allowing customers to spend money on goods and services rather than transportation costs.
3. Allow states to decide how much money is needed for road projects and mass transit and tax accordingly.
4. Allow states to prioritize projects as needed, rather than relying on government input and the strings that come with federal funding.
5. Allow states to decide whether money should be spent on mass transit rather than the federal government. What works in New York City may not work in Richmond, VA.
6. Eliminate the need for federal employees who work for the Federal Highway Trust Fund and associated programs.
7. Allow states who are fiscally responsible to naturally attract residents and businesses through lower fuel taxes. While penalizing wasteful and inefficient states who will lose residents and businesses due to high fuel taxes.
8. Allow privatization of road, bridges, and other transportation projects to decrease costs.
In recent years gas taxes have become like cigarette taxes. The government continues to increase the taxes and rely on the revenue for more and more projects, while at the same time lecturing on the evils of the product. What happens to the Federal Highway Trust Fund if the government gets its way and we are all driving little bubble-cars, electric vehicles, and hybrid vehicles? An even more important question is: What happens if the government gets is way and starts collecting taxes by charging for each mile we drive? Such a move would be disastrous for our economy and our country.
The Federal Highway Trust Fund, and federal gas taxes are another easy example unneeded taxes and programs that could be immediately cut at a cost savings to taxpayers.