Friday, October 18, 2013

Good New Summary Report on Reauthorization Funding Options

The Congressional Research Service has published an excellent new report summarizing the transportation funding options we are likely to look at during a Reauthorization legislative process (“Funding and Financing Highways and Public Transportation,” available here).
As they usually do, CRS manages to summarize a lot of material, some of it pretty complicated, in a readable document that policymakers can actually use.  The reader can quickly learn where we are in terms of federal surface transportation funding, how we got here, and what our options are for going forward (including “do nothing” and let the Highway Trust Fund shrink or disappear altogether).  Although most of this ground has been plowed before, two sections should be noted for their fresh treatment.  First, the paper describes the Trust Fund financing problem in a remarkably clear fashion, with both text and numbers.   A simple spreadsheet (yes, it is possible to use a simple spreadsheet to communicate complicated information!) sets out the shortfall in high relief.  Second, the authors provide a two-page legislative history of the motor fuels tax and the Highway Trust Fund over the past 30 years that reminds us not only of the controversial nature of the subject but also of the convoluted nature of the Congressional process.  These process issues are often given little attention, but they are important for the Capitol Hill audience for whom the paper is oriented.  (They are not for the faint of heart, being essentially a report from the industrial engineers at the sausage factory.)
However, I do have a few quibbles.  I have the same quibbles with most papers done on this subject, but I want to note them here as they can affect the policy process that the CRS paper will help to inform.
First, the authors call attention to the growing gap between motor fuels tax revenues and identified transportation needs, suggesting that Congress may need to find new sources of income.  One of the sources discussed later is indexing the motor fuels tax.  However, I think it is fairer to say that increasing the motor fuels tax and indexing it and maybe adding a few refinements would in fact solve the problem, at least for a considerable time
Second, the paper alludes in passing to the “political difficulty” of raising the gas tax, but I think does not fully recognize that the perception of that “political difficulty” is pretty much the only reason we are passing over the obvious solution (increase and index the gas tax) in favor of more exotic options.
Third, in common with most papers on the subject, the CRS effort, I believe, seriously underestimates the “political difficulty” of passing alternative taxes.  Do we really think that the anti-tax forces will be just fine with enacting a national sales tax or a VMT tax?  I don’t understand why we think that novelty will make the medicine go down better.
Fourth, I believe that the authors – again in common with many others – also seriously underestimates the likely opposition to a VMT tax due to the privacy issue.  True, they suggest that data collection not using GPS systems may provoke less resistance than a system that does.  That may be so, but remember we live in an age in which enacting a middle-of-the-road health insurance reform bill leads to talk of nullification and secession and in which scientists identifying the crisis of climate change are held to be fraudulent conspirators.  What do you think these people will say about a national VMT tax, even if it starts out on a low-tech basis?

Fifth, I would have preferred that the report more clearly point out the difference between “funding” and “financing” options.  I think many people still think of PPP and Infrastructure Bank money as “funding” rather than “financing.”  That’s like confusing money you get from a paycheck with money you get from a payday loan.  Last year (here) I called attention to language I like a lot in a GAO report:  “While these tools have promise to help meet increasing transportation demands, they are forms of debt that must be repaid, not new revenues.  New revenues for transportation infrastructure investments can come only from two sources: new taxes or new fees. Ultimately, raising new revenues or reducing transportation spending or both will be needed.”

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