Yesterday I attended a briefing on MAP-21, a bill addressing the issues facing the federally funded highway system put on by the Competitive Enterprise Institute (CEI), Independent Institute and Reason Foundation.  The hot topic of the briefing was the gas tax, which according to Randal O’Toole and Gabriel Roth, bigwigs of the Cato Institute and Independent Institute, needs to be phased out and replaced by a more effective instrument.  They suggest a system using vehicle mile fees (e.g. smart trip chips in cars, toll roads, etc.) rather than flat gas tax as the solution to future highway finance.

The gas tax we pay today had its origins in the 1956 legislation under the Eisenhower administration.  Eisenhower, a 5-star general who assumed the presidency in the wake of WWII, approved the construction of a 41,250-mile Interstate Highwaysystem to increase national security and increase interstate commerce.  The legislation provided funding for this project primarily in the form of a gas tax but also contained an important provision; that upon completion of the system the fuel tax would be dropped and financing for roads would return to the states.  The 1956 legislation resulted in one of the most effective highway systems and is seen as the greatest road system since Roman times.  The project was complete in a timely manner, but financing power was never returned to the states and the federal government continues to collect the gas tax.

The gas tax is now ineffective because fuel efficiency of vehicles and inflation have decreased the effectiveness of the tax in raising money for roads – to the point where the Federal Highway Fund is on the brink of insolvency.  Improving technology and environmental policy have led to more efficient cars that pay less tax since they use less gas.  Electric cars pay virtually no tax while contributing the same wear and tear as other vehicles paying the full tax.  Clearly, there is a need to better share the burden of road finance more evenly among those who utilize our nation’s highways.

Some argue that financing for the roads should simply be given back to the states.  Others, including O’Toole, argue that the solution lies not only in the transference of power back to the states, but in taxing each vehicle on a basis of which roads it travels on.  Smart chips, similar to those already in use in the trucking industry, allow for tracking via satellite the specific roads used so that the tax revenue exacted from the individual will go directly to the upkeep of the roads frequented by that driver.  No more “Bridge to Nowhere” waste or misappropriation of funds.  Toll roads like those used extensively in Florida and Texas also do a better job of efficiently taxing and have the additional benefit of reducing congestion.  Both methods create sustainability in road infrastructure; sustainability we need if we want our roads to last longer than the Roman’s.

The original goals of the ’56 legislation have been met.  The interstate highway system has been completed.  There no longer remains a compelling reason for the federal government to retain control of highway construction and finance via the gas tax.  State and local governments can more effectively tax and build roads and should be returned the flexibility and authority to do so.  Additionally, competition between the local and state governments in providing roads should help decrease the costs of road construction and improve the quality.  Putting the tax money right back from where it came just makes good sense.