WASHINGTON: February 17, 2018. – Having realized the decrepit condition of US highways, bridges and other means of public transportation, President Trump has proposed spending $1.5 trillion to fix the problem. He knows that the infrastructure must be significantly upgraded. His primary concern is for public safety. Is a new gas tax the fix?
But he also knows that for his tax cut, his moves to eliminate counter-productive regulations and his renegotiation of unfair trade deals to jump-start stagnant economic growth, infrastructure improvements are essential.
As any astute businessperson would do prior to authorizing large expenditures, a source of funds must be found. Many of these projects are generally viewed as public goods, meaning all taxpayers share in the cost. Since Trump doesn’t generally favor mandatory taxation for all income earners, he is looking for different ways so that the users of the improvements pay a larger share of the cost than non-users.
Toll roads shift the cost to the user.
Most roads, highways and small bridges are a public good, so all taxpayers share in the cost. For higher class superhighways, suspension bridges and most public transportation, the users pay a fee or toll. That means government subsidies are less so non-users end up paying less.
The size of the subsidy usually depends upon the loudest and most persuasive voices in government.
Since the federal government is already trillions of dollars in debt, Trump estimates that federal income taxpayers will have to pay only 13% of the total needed. The rest will come from the states, who residents use the infrastructure. Trump also believes private enterprise should be brought in.
By partnering with local governments, private companies can build, maintain and own highways and bridges. Of course, the roads would be subject to all government laws and would be available to any driver who paid the toll. That means taxpayers don’t have to borrow large sums. Since businesses primary motivation is profit, they will keep the roads in top condition.
Fortunately, Trump cut the corporate tax rate from 35% to 21%. That immediately gives firms the new capital to make these investments. It also means that they can charge lower fares and still maintain profit margins since they no longer must pay excessive federal income taxes.
How about another non gas tax?
There will be new and improved federal superhighways that could be crisscrossing the entire country. The federal government owns these roads. It is too large an investment for a private company. It would not be possible to charge the users without putting on a large toll.
Large tunnels, new bridges, and upgrades to the railroads are all included in Trump’s proposal. While many of these projects will end up being a public/private partnership, the federal government could end up giving some financial support. Trump must figure out how to pay for that.
Nobody wants to pay taxes. There are many people who continue to believe that Americans are Taxed Enough Already (TEA Party) and are organizing to try to stop any new taxes.
They reason that they pay:
- 20% to 30% of their income to Federal Income Tax,
- 6.2% (really 12.4%) of their wages to Social Security tax, a state income tax in most states which could be as high as 13% of income
- A sales tax of 6% or more on nearly everything they buy in most states
- thousands of dollars, or more in property taxes
- a 2.3% Medicare tax and special hidden taxes on gasoline and alcohol.
We have been Taxed Enough Already.
The gas tax.
Taking everything into consideration perhaps a 25 cent tax on each gallon of gasoline may be the answer. Because Trump has made it easier for US firms to take advantage of the vast natural resources of the US, there should be a plentiful supply of gasoline at a reasonable price. Some members of Congress point out that the federal gas tax is only 18 cents per gallon. And that it hasn’t been raised in 25 years.
Since any tax on consumption is regressive, this is not the perfect solution. It should, however, raise sufficient revenue which will make budget hawks happy. It will encourage the use of high mileage gas powered cars and the use of electric cars which are being more available to the public and at lower prices. This should keep the Progressives happy. The tax also means that those who use the roads the most will end up paying the most. That seems somewhat fair to everyone.
The gas tax is not an ideal solution. Best it may be the best we can come up with.