Commentary: Wanting it all

Voters, lawmakers want highways, but not bill

According to highway advocates, Arkansas needs $160 million more per year to maintain and expand its ailing roads. Arkansas highways are underfunded today because inflation and ever-increasing fuel efficiency reduce revenue from the per-gallon tax. As of this writing, the Governor's Working Group on Highway Financing has just presented Gov. Asa Hutchinson with options to raise the money.

But the same inflation and fuel efficiency that erodes highway funding also reduces the real gasoline taxation rate--a crucial point that highway advocates haven't mentioned. Thus, the obvious solution is to recover the previous funding balance by raising gasoline taxes and switching from per-gallon to per-dollar taxation to cancel inflationary effects. This is a "no new taxes" solution because in real dollars, drivers would pay no more (per mile) than they paid a decade or two ago. According to the Working Group, a mere 8 cent rise in gasoline/diesel taxes (now at 21.5 cents for gasoline) would raise $160 million. Highway tolls are another sensible solution. Fuel taxes and road tolls are based on the long-standing premise that drivers should pay for the roads they use.

It's silly for Arkansas to even be debating this. Eight cents is small, and simply represents a return to the real rate of a few years ago. But it's become a big deal because the Legislature buys into the "no new taxes" religion, and Hutchinson stipulates "revenue neutrality," i.e. no net tax increase. Conservatives have created a problem where no problem really exists.

"Revenue neutral" means the money would come from raiding sorely needed funding for schools, colleges, prisons, public safety and human services. Some legislators have taken revenue neutrality to extremes by suggesting they would be willing to tax poor people's groceries to build highways. Former Gov. Mike Beebe had wisely pushed to reduce the state sales tax on groceries from its previous 6 percent level to 1.5 percent, and provided by law to automatically eliminate the remainder in 2016. The legislators want to repeal this provision.

As a less drastic solution, the Arkansas Good Roads Foundation director, Craig Douglas, suggests that "general revenues generated by the existing sales tax on... vehicles should go to the highway fund rather than being diverted to general revenue." But those funds currently go to important public projects that will then be deprived. Would Douglas also argue that revenue generated by sales taxes on, say, lawnmowers are currently being "diverted" by being used for non-lawn-mowing purposes?

General revenues should never, never be raided for highways.

The problem is not really a shortage of adequate roads; it's an overabundance of cars and trucks. Drivers' desire for a nearly free lunch and America's worship of the automobile have produced arguably the worst transportation system in the highly developed world. The source of the problem is that, contrary to the free-enterprise notion that markets should decide commercial outcomes, today's drivers receive enormous subsidies that distort the market . An eye-opening study by the nonprofit International Center for Technology Assessment titled "The Real Price of Gasoline" (a web search will find it) documents the hidden subsidies that enable our driving addiction: oil industry subsidies, police and oil industry protection, and environmental and health costs. In 2015 dollars, this subsidy amounts to $7 to $21 per gallon of gasoline. Other industrial nations at least partially recognize this by taxing gasoline at $2 to $6 per gallon versus the U.S. average tax (state plus local) of 50 cents per gallon. This discrepancy is a big reason other industrialized nations' rail, bus, bicycle, and pedestrian facilities are generally better than ours, and a big reason people in other nations drive less and use alternative modes more.

The funding dilemma is highlighted by an Americans for Prosperity poll. Sixty-six percent of Arkansans say road conditions represent either a "crisis" or a "major problem," yet 64 percent say they "strongly oppose" or "somewhat oppose" a tax increase to pay to fix the problem. But given the distortions (highway congestion, a shortage of public transportation and of trails for bicycling and walking) already caused by our enormous subsidies for automobiles, the notion of financing Arkansas highways by raiding general state funds should be a non-starter. If drivers want better roads, they need to cough up the money to pay for it.

Arkansans who desire better highways but reject paying for it are, in effect, voting with their wallets to reject new highway funding. If drivers can't handle an additional 8 cents per gallon, the new funding should be rejected.

Commentary on 12/29/2015

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