Making the GOP Case for a Gas Tax Increase

Michael S. Bronzini

by James A. Bacon

For years, Republican politicians in Virginia have held firm in their opposition to higher taxes, even if those taxes, like the levy on  motor fuels, can be construed as user fees. But the ground seems to be shifting.  A study published September and underwritten by former Gov. Jim Gilmore’s Free Congress Foundation stops just short of endorsing an increase in taxes/user fees to upgrade the nation’s surface transportation system. This comes at a time that the McDonnell administration says it is “considering seeking additional revenue sources” to maintain state roads and highways.”

In his paper, “Surface Transportation: The Case for Growth,” Michael S. Bronzini, an engineering professor at George Mason University, argues that investments in surface transportation promote economic output and productivity, that public investment has been lagging needs for several decades, and that the private sector is unable on its own to meet the need for regionally and nationally interconnected networks of transportation services.

“While some gains can be made through better use of existing revenue, rehabilitating the existing system and investing in our future will require spending that is tens of $billions per year above recent levels,” Bronzini writes. “It may be time to recognize that investing in surface transportation is one of the most productive uses of tax revenue, hence citizens should expect their legislators to accord this high priority.”

Bronzini cites a number of sources to make the case that investments in roads, highways, transit, railroads and maritime systems have a “provable link” to economic development. Most notably, transportation infrastructure lowers production costs, permitting more output and a higher GDP than otherwise would occur.  Investment in non-local roads between 1950 and 1980 yielded annual cost savings to industry of 24 cents for each dollar of investment. The rates of return were significantly higher than returns to private capital and the long-term interest rate.

(Bronzini cites a Rand Corporation study in support of this argument, but he mentions only in passing Rand’s conclusion that the returns have been declining steadily over time and have reached a point by 1980 at which point it is was debatable whether additional investment in road and highway represented a net social gain or loss.)

Bronzini points to a February study by Stephen S. Fuller, also of George Mason, that calculated the economic impact of constructing 16 proposed mega projects as public-private partnerships backed by tolls. The projects, ranging from the Third Crossing in Hampton Roads to the Coalfields Expressway, would cost a total of $30 billion but create a $4 billion gain to State Domestic Product, including 57,000 jobs and $2.9 billion in personal earnings. Two years’ of added economic growth attributable to the mega projects would equal the state’s financial contribution.

In making the case  for higher levels of government investment (he can’t bring himself to say higher taxes), Bronzini argues that real (inflation-adjusted) highway spending per mile has fallen by 50% since the federal Highway Trust Fund was established in the late 1950s, that the number of miles traveled by automobiles and trucks has roughly doubled, and that half the lane-miles on federally funded roads are in various stages of decrepitude. “An ever-expanding backlog of investment needs is the price of our failure to maintain funding levels — and the cost of these investments grows as we delay.”

Bronzini discusses the motor fuels tax, which can be construed as a “user fee” on the grounds that “the more you drive, the more you pay.” Increasing the tax is one way to deal with the funding shortfall, he suggests.  An increase in the fuel tax of 10 cents per gallon would amount to $5 per month per vehicle, or $9 per month per households. He warns, however, that the motor fuels tax are not a stable, long-term funding source as cars get more miles to the gallon, and that an alternative such as a Vehicle Miles Traveled fee may have to be considered.

Two things are missing from Bronzini’s analysis. First is the recognition that not all projects are created equal. Some provide a better return on investment than others. He avoids drawing the obvious conclusion that there needs to be a mechanism for separating economically viable projects from the boondoggles Secondly, he shuns any discussion of human settlement patterns. The economic payback of transportation improvements is inseparably tied to the balance, or lack of it, of land uses served by the improvements as well as the density and connectivity of development. A case can be made that the motor fuels tax should be raised to a level that can pay for properly maintaining existing infrastructure. But at present, no sound methodology exists for determining where funds for new construction can be most effectively deployed. Until we develop that methodology, the discussion of how much money we need to raise in taxes and user fees is getting the carriage before the horse.

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16 responses to “Making the GOP Case for a Gas Tax Increase”

  1. did I hear the phrase “freight rail” or “intermodal”?

    when I hear all this talk about “return on investment” and GDP…. in the context of urban interstates full of – not freight – but individuals driving cars solo twice a day … things get pretty fuzzy.

    when I send a letter or get a package delivered by UPS – the both tend to get delivered in a pretty timely manner.

    In fact, you’ll find US Mail truck contractors and UPS / FedEx barreling down the interstates a 3 or 4 am … in order to get through the urban areas that will be chock-a-block at 6-7am.

    The same is true of Walmart and Wegmans and other grocers….

    so what exactly is the problem ?

    bonus question: How come CSX and Norfolk Southern are not also part of this discussion if it is about economic development?

    Is the solution to our economic development “problem” to build more roads for twice-daily rush hour solo driving? or is there something else that is at issue?

  2. most polls show a fairly consistent 80% opposition to increasing the gas tax..

    even after you discount for the no-tax folks you end up with another 40% or so of people who are not typically classifiable as “no-tax” so what gives?

    My view is that there is a tremendous skepticism as to how the gas tax is spent and most people just don’t trust that higher taxes will result in effective improvements.

    the second piece of evidence here is that in Va – when a referenda is held that names specific projects – people will often vote for it.

    the major referenda that got shot down in 2002 was fuzzy about what projects would be funded when weasel words showed instead what projects MIGHT be funded.

    the voters were not fooled.

    finally – despite opposition to tolls – more people support tolls than do increased as taxes.

    again – what do we make of this?

    my take is that people support referenda for specific projects and they support tolls for specific roads – and they oppose referenda and taxes for non-specific projects.

    bottom line: people ARE willing to PAY – MORE for transportation infrastructure – as opposed to people not willing to pay for any…..

  3. Groveton Avatar

    Government spending, across all levels of government, is 41% of national GDP.

    Other than during the two world wars, this is the highest level of government spending, relative to GDP, in at least the last 100 years (I don’t have data before that).

    The problem is that all that government spending has not made America secure, it has not corrected a stubborn recession, it has not reduced the wealth gap and it has not even kept the roads in serviceable condition.

    Now, as usual, we get some reasoned thinking from George Mason University. GMU is, in my opinion, is the most useful university in Virginia even if it is not (yet) the best rated. They say what all of us know to be true – you can’t badly neglect transportation funding and expect good economic results. This truth seems so obvious it’s hard to even come up with a name for any organization which cannot understand the truth. Let’s see … oh yeah! I’ve got it … The Clown Show in Richmond.

    Seriously, our government spends 41% of the national GDP and we can’t keep the roads paved?

    Occupy Wall Street? Occupy Capitol Hill!

  4. Who is paying Bronzini? How much did he get paid to write the study? Stephen Fuller is one sharp guy, but much of his work is done to please his donors/clients — real estate developers. If Bronzini is Fuller’s colleague, I don’t expect his research efforts are much different.
    As I indicated in an earlier post on a related topic, I am not opposed to some sort of indexing of the gas tax if it is accompanied by real reforms that focus on public benefit and not simply enriching some people’s real estate investments.
    “If the system does not produce satisfactory results, why would taxpayers give the system more money? 1) Pass Jim LeMunyon’s bill and make it applicable to the entire state. 2) Eliminate the $200 million plus annual subsidy for overweight trucks. 3) Change the formula for maintenance from lane miles to traffic volumes. 4) Require all contacts with the CTB or its members to be reduced to writing and posted on the Internet. 5) Transfer control of all local roads to counties, just as cities and towns have control over their local roads. 6) Pass an adequate public facilities law. 7) Abolish the NVTC. 8) Index the gas tax to changes in producer prices.
    I do not believe that the people who are funding Bronzini have any interest in improving travel times and safety for Virginia’s drivers. If they did, they would be championing reforms in the entire VDOT process.
    I do agree with Groveton, however, that we need to look at what we spend money on and not just how much money we spend.

  5. Groveton Avatar

    “If the system does not produce satisfactory results, why would taxpayers give the system more money?”.

    I have to throw the illogic flag on that one.

    What system could produce satisfactory results if it’s funding was frozen at 1986 levels?

    How many employees would stay with an employer if they earned the same amount (in total dollars) today as they earned in 1986?

    How much money would Coca-Cola make if it sold its products today for the same price it charged in 1986?

    There are greedy landowners who want to coopt transportation spending for their own purposes. However, I suspect there are greedy homeowners who see opening up outlying regions with better transportation as a means of raising the supply of housing while lowering the value of their homes.

    Don’t be fooled into thinking greed is a one way street. There are plenty of people in North Arlington and McLean who know that their homes are worth more with Rt 7 as a bottleneck for commuters from Loudoun than would be the case if the Rt 7 bottleneck were fixed.

    Many of these people could easily hold their own in a “greed off” with Til Hazel.

  6. Until we start spending tax dollars on transportation improvements that produce the greatest returns on public investment (reduction in traffic congestion and improvement in safety), we could triple the gas tax and see negligible improvements in either.
    We are spending billions on the Silver Line, which any elected official will tell you is not about transportation, but rather development density. If Metrorail expansion was about transportation, the line would have been built in the middle of DTR median. We could be operating today, with stations at Tysons, Reston, Herndon and the Airport. Trips to and from Dulles Airport would be quicker than they will be under the built alignment. The Feds’ $900 million would have gone a lot farther.
    Route 7 will be 8 lanes between the Beltway and the DTR once the rail line opens. It will be six lanes between the Beltway and I-66. VDOT is studying how to improve Route 7 between the Toll Road and Reston Parkway. It might well be six lanes, have reversible lanes or even HOV/transit lanes. Those projects will likely help, but not fix, traffic congestion on Route 7 near Tysons. There was a strong push from many McLean residents to put the Route 7 projects higher on the list of priorities and to obtain support from elected officials since this widening project would likely provide some traffic relief. I know a number of McLean residents who support HOT Lanes, which both VDOT and Fairfax County DOT believe will provide some traffic relief and reliable bus transportation on the Beltway.
    But every precinct in McLean (indeed, in all of the Dranesville district) voted against the Sales Tax increase in 2002. There was no faith in the proposed projects, the judgment of government decision-makers or the intentions of the tax supporters. Higher taxes without transportation reforms will not fix anything.

  7. Groveton Avatar

    “Higher taxes without transportation reforms will not fix anything.”.

    Transportation reforms without the taxes to fund them will not fix anything either.

    Maybe the transportation prioritization approach at the state and local level is screwed up. Maybe. However, the gas tax frozen for 25 years at 17.5 cents per gallon is a goat rodeo. Definitely.

  8. Groveton Avatar

    “Route 7 will be 8 lanes between the Beltway and the DTR once the rail line opens. It will be six lanes between the Beltway and I-66.”.

    So, all the traffic headed East in the morning will go from 8 lanes to 6 lanes unless they bail on the toll road? Why not 8 lanes all the way to 66 (which needs to be widened too)?

  9. Groveton, as I recall, the County believes that it essentially would be impossible, for a number reasons (including money, community reaction, reluctance of the Board of Supervisors to condemn or support condemnation of land for rights-of-way), to obtain additional rights-of-way outside Tysons proper to widen Route 7 beyond six lanes from the Beltway to I-66. Indeed, with one exception, there are no plans for any road improvements beyond what is in Table 7. Any growth beyond 84 million square feet at Tysons must be accommodated solely by transit use. There will be no additional road projects in and around Tysons after 2030.
    The only addition to Table 7 is the widening of Route 7 west of Tysons. This project was previously opposed by the Board of Supervisors and was only approved last year. John Foust made a major contribution in this area, as did Linda Smyth.
    Also, Route 123 will be eight lanes from Route 7 to the Beltway.
    The County believes that traffic from the Beltway and the DTR will be handled within Tysons by the eight lanes on Route 7 and Route 123, as well as the grid of streets, which will be built over time.
    Keep in mind that Table 5 to the Comp Plan requires extreme Traffic Demand Management programs for continued development at Tysons. For example, landowners within 1/8 of mile of a rail station must achieve a 45% reduction in peak hour rates, as calculated by the Institute of Transportation Engineers, no later than 2020. Ten years later, this becomes 55% and by 2050, the reduction must hit 65%.

  10. “Transportation reforms without the taxes to fund them will not fix anything either.”

    That’s why my proposal includes indexing the gas tax in one manner or another.

  11. it looks like there is agreement that we need to tax at whatever level it takes to insure that adequate maintenance (and operations) is kept intact.

    less agreement on when, where, how to build new roads and where the money will come from.

    Virginia has weighed in with what they are calling Corridors of Significant State interest and has included access management as a strategy for protecting, preserving and rehabilitating state roads.

    They’ve apparently included the -previously-thought-to-be-dead Western Transportation corridor but the thing sort of dead-ends at the Potomac so it doesn’t make much sense as a state road and even though they say they’ve got money for it… I’m skeptical about that.

    I think people will be okay with indexing the gas tax for maintenance but they are not going to be okay with increased taxes for new roads unless they see the roads proposed – much like the several transportation referenda that have been held in Fairfax and Prince William. People are not going to sign on to “funds” from which Richmond will decide how to use.

  12. Route 7 is a Primary Road and will always be the responsibility of VDOT even with devolution.

    I’m not sure if I have ever read anything from VDOT that describes this road and the purpose of it – and it’s functionality.

    what would be interesting would be to see a map of the primary roads in NoVa. with all the other roads removed from the map.

  13. Routes 7 and 123 are also part of the national highway system, so Uncle Sam has some say in what occurs there. Those roads must meet federal standards, as the Tysons Task Force learned the hard way.
    I agree with Larry with respect to ensuring there are sufficient funds for road maintenance. But just as NoVA and Tidewater rejected sales tax increases to build roads that others wanted, I think the average Virginian does not want to pay to build roads that don’t provide some decent return on investment. How will this project reduce traffic congestion and increase safety?
    Another issue is right-of-way. In many communities, there is no sentiment for widening certain roads and the cost of obtaining land can be prohibited. We need much more telecommuting as well.

  14. Groveton Avatar

    Concatenating two comments from different contributors:

    ” Route 7 is a Primary Road and will always be the responsibility of VDOT even with devolution.”.

    “Groveton, as I recall, the County believes that it essentially would be impossible, for a number reasons (including money, community reaction, reluctance of the Board of Supervisors to condemn or support condemnation of land for rights-of-way), to obtain additional rights-of-way outside Tysons proper to widen Route 7 beyond six lanes from the Beltway to I-66. “.

    Once again, I wonder … is this a state matter because it is a primary road or a county problem because (presumably) it runs through a county.

    So, we have a conundrum – strict adherence to Dillon’s Rule or a reduction in the scope of the Clown Show in Richmond?

    Then, there is this …

    “Also, Route 123 will be eight lanes from Route 7 to the Beltway.
    The County believes that traffic from the Beltway and the DTR will be handled within Tysons by the eight lanes on Route 7 and Route 123, as well as the grid of streets, which will be built over time.”.

    I understand each and every word of that. Do you want to know why? BECAUSE I LIVE HERE. There is no chance I’d understand a similar comment about Henrico County (or anywhere else). So, why should RoVa get to vote for all-knowing all-powerful state Clowns to dictate how transportation works in NoVa? And why should NoVa get to vote for all-powerful Clowns to dictate how transportation works in RoVa?

    “The government which governs closest to the people governs best”. Either you believe that or you don’t. I do. If you do too then you need to argue for a dilution of Dillon’s Rule in Virginia and a diminution of The Clown Show in Richmond.

  15. well.. Groveton has sort of put the focus on what Va’s role ought to be with respect to non-secondary roads – primary roads.

    The truth is that Va’s way of classifying roads as secondary or primary is a dysfunctional artifact but even when you use a more modern classification system that classifies according to actual functionality – like arterial or connector, etc there still in the conundrum about which of those roads are essentially local roads .. for local commerce and which are roads of statewide significance.

    there is no question that there are such roads – even Groveton believes that Charlottesville should not be crapping up Rt 29……

    so he actually supports VDOT aka “the clown show” in that endeavor but apparently for Charlottesville but not NoVa.

  16. The distinctions between cities & towns, on one hand, and counties, on the other, no longer makes any sense in the areas of land use and transportation. Cities and towns control both local roads and land use. So do Arlington and Henrico Counties. There is no good reason why Fairfax, Loudoun and Prince William Counties do not control both.
    Just as in many other states, VDOT can control major thoroughfares, with counties controlling the remainder. But unified control and responsibility takes away the ability of local supervisors to blame VDOT for bad land use decisions. There are not many supervisors who could honestly put a Harry Truman-style “the buck stops here” plaque on his/her desk. Many want the power without the responsibility.
    One good thing coming from VDOT’s financial woes is Fairfax County is making a significant effort to coordinate land use and transportation at Tysons Corner. The 527 Traffic Impact Analysis requirement also pushed the County to be responsible.

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