With gas prices dropping quickly, there are increasing calls on both sides of the political spectrum for increasing the gas tax. I penned the following article offering a few policy ideas for what policymakers both in Washington and New Mexico ought to do before such a tax hike is considered.
With the precipitous decline in gas prices, there have been increasing calls at both the federal and state level for raising gas taxes. While opposition may seem to be founded on mere anti-tax sentiment, the reality is that there are several reasons not to increase gas taxes on either the state or federal levels.
First and foremost, it is time for Washington to step aside when it comes to most transportation policies. Transportation was largely under state control until the advent of the Interstate Highway System in the late 1950s. This system involved the creation of a massive network of highways designed to exacting specifications as laid out by federal policymakers.
Since the Interstate Highways were developed partially for defense purposes, Washington was involved in funding and implementing it. But the system is built. Now that it is, the focus should be on devolving most transportation programs to the states. This “devolution” concept was proposed in the most recent Congress as the “Transportation Empowerment Act” by Sen. Mike Lee (Utah) and Rep. Tom Graves (Georgia).
Essentially, the Act would eliminate Congressional “pork,” the mandatory diversion of tax revenue from roads to transit, beautification projects, and bike paths, and it would give states greater flexibility in how they fund transportation initiatives within their borders. After all, mass transit may work well in New Jersey or densely-populated parts of California, but are unnecessary in Wyoming or New Mexico.
Devolution would also free states from costly labor regulations known as “Davis-Bacon” which inflate the cost of federal highway projects by an estimated 10 percent.
Raising the federal gas tax would simply lock the current system into place with all of the costly diversions and over-priced labor while costing motorists and our economy at the pump.
Of course, Washington is only one part of the transportation puzzle. New Mexico’s Legislature will also be considering legislation to increase the gas tax. This effort is misguided as well.
For starters, New Mexico policymakers have unnecessarily raised the cost of state-funded public works projects including roads and schools through “Davis-Bacon” prevailing wage laws. Since labor is such a significant component of the cost of construction projects, it is only sensible to pay fair market wages rather than arbitrarily inflating them. Legislation has been introduced by Rep. Nora Espinoza to reform New Mexico’s Davis-Bacon law.
It also makes sense for New Mexico to consider alternatives to gas taxes as a means of funding road construction. With the increased efficiency of gas-powered vehicles and the development of gas-sipping hybrids and even electric vehicles, there can be no doubt that gas taxes don’t go as far as they used to. To the extent that gas taxes are a “user-fee” paid for by those who use the roads, it makes sense for all road users to pay something for the construction and upkeep of New Mexico roads, even if your vehicle of choice is not fueled by gasoline.
This leads directly to the potential for alternative financing methods including so-called “PPPs” or “Public-Private Partnerships.” PPP’s are a means of bringing private investment dollars to public projects which in turn can result in more and better-maintained infrastructure.
To the extent that New Mexico’s transportation infrastructure is in need of additional funding, policymakers should enable entrepreneurs and private capital to help fund these needs.
If, after all these reforms have been implemented and New Mexicans still see infrastructure funding as inadequate, then it may be reasonable to consider raising the gas tax, indexing it to inflation, or both. Fortunately, there are still numerous inefficiencies in the current system that can and should be unlocked.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility