McCain's Gas Tax Pander—Who Loses?

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Reason Foundation founder and transport maven Robert Poole singes Sen. John McCain for his proposal for a summer gasoline tax holiday. From the Out of Control blog:

I was flabbergasted by John McCain's proposal to suspend collection of the federal gas tax for this summer. Suspending this user tax would deprive the Highway Trust Fund of $8-10 billion in much-needed revenue to patch potholes, rebuild failing bridges, and keep the Interstates and other key arteries from further declines in their already pathetic levels of performance. And this comes at a time when the Trust Fund is already facing a 2009 shortfall of $2-3 billion (thanks to Congress legislating more highway spending than existing gas-tax revenues can support). Plus, since the gas tax is only about 5% of the cost of a gallon of gas, the savings to motorists would be trivial.

McCain's advisors have rushed forward with damage control, promising a legislative proposal that would hold the Trust Fund harmless by replacing the lost gas-tax revenue with general fund money, thereby adding another $8-10 billion to this year's ballooning deficit. That would at least make the proposal less irresponsible from a transportation policy standpoint.

Poole's solution? Instead of tax games and a fake trust fund, sell the highways. Or as he puts it:

The longer-term solution is to scrap the 20th-century tax-and-grant system in favor of universal tolling, managed by each state's Department of Transportation and private toll companies.

Whole item here.

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  1. The longer-term solution is to scrap the 20th-century tax-and-grant system in favor of universal tolling, managed by each state’s Department of Transportation and private toll companies.

    Welcome to the glorious 21st century, where Wyoming and Montana no longer have paved roads.

  2. We finally have the technology to make toll roads painless from a transportation logistics point of view, so nobody can complain that “OMG! We’ll all have to wait in line every time we want to get on or off the highway!”

  3. The longer-term solution is to scrap the 20th-century tax-and-grant system in favor of universal tolling, managed by each state’s Department of Transportation and private toll companies.

    The key to the problems created by the 20th Century Hyperstate is to go back to 19th Century Mercantilism? There is a long term libertarian solution: one word: Hovercrafts.

    If you need me for anymore indepth policy analysis I’ll be in my office. Now, where did I put that last roll?

  4. Plus, since the gas tax is only about 5% of the cost of a gallon of gas, the savings to motorists would be trivial.

    Plus plus, since the high price of gasoline is due to limited supply, and since the gas tax holiday won’t be around long enough to change the characteristics of the supply, the savings to motorists would be almost nil.

  5. Elemenope,
    I am not sure I agree with you. Wyoming and Montana are in the middle of the major trucking route from the heartland to the Pacific Northwest. The major highways will be paid for by commercial traffic. The smaller byways may suffer but then again if nobody uses them enough to pay for them, then why are they being maintained in the first place?

  6. There is another Reason Blog? Who knew? Obviously no one here, there are hardly any comments on the posts over there.

  7. FLP –
    That’s Reason.ORG. This is Reason.COM

  8. Elemenope: I assume you were commenting on how gloriously well run our government highways are now. Or as Poole noted:

    ….to patch potholes, rebuild failing bridges, and keep the Interstates and other key arteries from further declines in their already pathetic levels of performance…

  9. I’ll argue against 90% of the crap that governments think they are responsible for. maintaining infrastructure is one just a few things that seems to be an appropriate use of government. Let’s try to move closer to economic freedom (or at least stop the slide towards socialism) and THEN maybe we can complain about the evil government building roads.

  10. Except that those highways were already built using tax money so going for the double hit seems excessive. Now if you want to build new highways and pay for them through tolls, have at it.

  11. The first thing we need to do is eliminate Amtrak and tear up all subway, light rail and commuter lines. This will shift new innovation and funds into automobile and road construction as commuters are liberated to purchase cars and toll road fares from the collectivist nightmare of public transportation.

  12. Toll roads! Hell Jeah!

    I just want to own one little 1/4 mile segment on I-85 and charge “free market” prices!

    Damn skippy.

  13. Pinette –
    It wouldn’t be so bad that the evil government builds roads except that it can’t even manage to do it in a way that responds to demand. Highway projects are good pork projects and highway funding in no way gets distributed based on need.
    And if the government is going to maintain a ridiculously subsidized system of interstate roads and airports, they should at least beef up the interstate rail. But many people are against that, even if they are public infrastructure libertarians.

  14. Pinette | April 16, 2008, 4:18pm | #
    I’ll argue against 90% of the crap that governments think they are responsible for. maintaining infrastructure is one just a few things that seems to be an appropriate use of government. Let’s try to move closer to economic freedom (or at least stop the slide towards socialism) and THEN maybe we can complain about the evil government building roads.

    That pretty much sums it up for me as well. I have a feeling many of these mercantilist sounding solutions are worse than current means which do not
    violate the principles of minarchial rule in the first place.
    the current means

  15. The toll system on the new Tacoma Narrows bridge is pretty slick. Pay without even opening your window at 70 mph.

    Do you wear a tinfoil hat? Then take the lane where you can pay cash. Either way they should never have an excuse for that bridge needing repair and no money to pay for it.

  16. No one makes more money from the sale of gasoline than the government. No one.

  17. Who Loses?

    Women and minorities of course. Don’t you guys know the answer to this one yet?

  18. I just want to own one little 1/4 mile segment on I-85 and charge “free market” prices!

    Awsome! And I can open a parallell chunk and we can have a price war!

  19. Since the gas tax actually approximates a relatively efficient user fee, it’s not very high on my hit list. In fact, I (gasp) think it’s too low. I would accept a hike in the fuel tax, if and only if the proceeds were held strictly for highway maintenance.

    Shifting from a user fee to the general fund for highway maintenance is the stupidest thing I’ve heard all day. But I don’t get out much.

  20. Maybe if the government didn’t subsidize roads and it was left to private enterprise there’d be more pristine wilderness, greater density, and less sprawl.

  21. There are toll roads all over the place in Japan. And extensive rail transit

    Outcome: huge rail uses.

  22. “Women and minorities of course. Don’t you guys know the answer to this one yet?”

    LOL Guy!!

    Of course this plan by McCain is brillliant. Contrast his willingness to give working Americans a break vs. B. Hussein Obama’s tax-hiking, government enlarging extreme liberal Democrat agenda.

  23. I have a feeling many of these mercantilist sounding solutions are worse than current means…

    That is the second time you have used mercantilism to describe paying for roads by toll. What do you mean by using that word?

  24. Of course this plan by McCain is brillliant. Contrast his willingness to give working Americans a break…

    The only people who get a break under such a gas tax holiday are petroleum producers and gasoline refiners. Although instead of “break”, I would use “windfall”.

    McCain once claimed not to know much about economics. With this proposal he proves it.

  25. Of course this plan by McCain is brillliant. Contrast his willingness to give working Americans a break vs. B. Hussein Obama’s tax-hiking, government enlarging extreme liberal Democrat agenda.

    AHAHAHAHAHAHAHAHA!
    *wipes tear from eye*

  26. Looking at a bunch of definitions for Mercantilism, my favorite is:

    an economic system developed during the decline of feudalism that put a premium on strict governmental regulation of economic activity with the aim of strengthening the state. It came under attack during the Enlightenment by such figures as Adam Smith.

  27. I have to break with my libertarian brethren on this one. I think building and maintaining roads is one of the few legitimate roles a government has.

  28. Of course this plan by McCain is brillliant. Contrast his willingness to give working Americans a break vs. B. Hussein Obama’s tax-hiking, government enlarging extreme liberal Democrat agenda.

    AHAHAHAHAHAHAHAHA!
    *wipes tear from eye*

    Have I not stated that Neil is now the funniest poster on H&R?

  29. The toll system on the new Tacoma Narrows bridge is pretty slick. Pay without even opening your window at 70 mph.

    Do you wear a tinfoil hat? Then take the lane where you can pay cash. Either way they should never have an excuse for that bridge needing repair and no money to pay for it.

    The Ambassador Bridge is privately owned, privately operated and privately maintained. The four-lane bridge carries more than 10,000 commercial vehicles on a typical weekday. The only government involvement is customs and INS.*

    Just sayin’.

    *Or whatever they’re called nowadays by the fiasco known as the DHS.

  30. He has to be a joke, right Epi? right?

  31. Is he really that far from Guy Montag, that he couldn’t be real?

  32. I maintain that whoever is behind “Neil” is a fucking genius web performance artist. We should all enjoy it.

  33. What Cab said. I just don’t like the way they pay for it. You know, with all the waste and fraud and stuff.

  34. I think building and maintaining roads is one of the few legitimate roles a government has.

    Don’t simply assert; you need to follow this to its logical conclusion.

    (1) Why is government better at this than the free market would be?

    (2) Why can’t the same argument be used to justify single-payer health care? government-owned airlines? a government monopoly on schooling? government allocation of other scarce resources, like oil?

  35. Have I not stated that Neil is now the funniest poster on H&R?

    I don’t think special olympics competitors are all that funny. 🙁

  36. Doesn’t basic infrastructure fall under the Commerce Clause anyway? It seems to me it was written to deal specifically with issues like infrastructure and interstate transportation. Even if roads were privatized, they’d be federally regulated anyway. I’m not against privatization, but would regulated highways be better than federal highways?

  37. “Is he really that far from Guy Montag, that he couldn’t be real?”

    Saying Im close to Guy Montag is the biggest compliment youve ever given me Joe!!

    Thanks!

  38. “I have to break with my libertarian brethren on this one. I think building and maintaining roads is one of the few legitimate roles a government has.”

    As would Johnston, who wrote “The Limits of Government”.

    http://www.amazon.com/exec/obidos/ASIN/0895266539/reasonmagazinea-20/

  39. John McCain’s proposal to suspend collection of the federal gas tax for this summer.

    Paul told Cavuto McCain got the idea from his legislation (2:30 mark).

  40. (1) Why is government better at this than the free market would be?

    Because true competition cannot exist, as there is only so much land on which to build a road or roads.

    (2) Why can’t the same argument be used to justify single-payer health care? government-owned airlines? a government monopoly on schooling? government allocation of other scarce resources, like oil?

    For the first three, see above. There can exist many, many options for those services. For oil, hmm. We need only look at recent history, like the long gas lines of the 70s, to see that control from the government was a bad idea.

  41. “(1) Why is government better at this than the free market would be?

    (2) Why can’t the same argument be used to justify single-payer health care? government-owned airlines? a government monopoly on schooling? government allocation of other scarce resources, like oil?”

    1) because when a company that owns a piece of interstate tanks, the segment they own will sit idle and decay — much like abandoned houses in the inner-city.

    The argument can be made, it’s just that it’s a silly one to make, because one could also posit in that vein (sp?) that the government should wipe everyone’s ass.

  42. Poole,

    My god…its a tax cut and you are a libertarian…get the fuck over it.

    But ya the US government should get out of the road business.

  43. 2) The argument can be made, it’s just that it’s a silly one to make, because one could also posit in that vein (sp?) that the government should wipe everyone’s ass.

  44. Welcome to the glorious 21st century, where Wyoming and Montana no longer have paved roads.

    I like the dirt and gravel roads I have driven in Montana…In fact here in Washington I own a mile or two of em…WTF is so great about pavement?

  45. What would the Pigovian Club do?

  46. Quit raiding the Highway Trust Fund for mass transit boondogles and get rid of the Davis-Bacon Act – a political handout to labor unions that has inflated the costs of roadbuilding (and all other federal construction projects) for about 70 years and counting.

    That will bring the Trust fund costs down and the gas taxes can then be cut back – but not eliminated.

  47. In the absence of private tolling (which, admittedly, has its problems too), I think the gas tax is one of the more “fair” taxes. For one thing it enables the tax payer to reduce or even eliminate the burden through choice. Don’t like paying it, but have a 50+ mile commute? You can go stylin’ in a 1994 Geo Metro XFi and get 60 mpg (or if you’re feeling saucy but still want to retain some frugality you can upgrade to a ’98-’00 Chevy Metro 5-spd and get ~50 mpg).

    I wouldn’t mind having a large portion of the income tax shifted to the gasoline tax. Of course truckers wouldn’t like it.

  48. Instead of a gas tax holiday they ought to suspend(abolish) the requirement for summer formula “boutique” gasolines. That would reduce the price substantially.

  49. Irrational McCain hatred prompts “libertarians” to oppose tax holiday. Film at Eleven.

  50. If I owned a piece of road in Washington DC, the Pope would not be allowed to navigate his pedophile-mobile on my turf!

    I got standards, bro!

  51. “I wouldn’t mind having a large portion of the income tax shifted to the gasoline tax. Of course truckers wouldn’t like it.”

    Neither does the average citizen, unfortunately. British Columbia is doing this (although in small increments), and the outrage from businesses and rural citizens has been explosive. We need a lecture series by Mankiw or something.

  52. Irrational McCain hatred prompts “libertarians” to oppose tax holiday. Film at Eleven.

    What part of the inelasticity argument is either irrational or emblematic of hatred for McCain?

  53. Of course JM is a fool for suggesting the holiday tax.

    But it is highly interesting that Libertarians would put their focus and requesting that state governments use tracking on all of their citizens to achieve “funding”.

    Because that is what tolling across the nation would be right now.

    Now one can posit that libertarians just view this as a trade off to further the freemarket, but, the reality of “selling” off of the “highways” of America right now, is probably closer, from an economic standpoint, to what is going on in Iraq, or in the way that the DoD still can’t be audited.

    The end result would be both higher road costs, and reduced liberty as more states but “I-pass” devices in cars like we do in Illinois, and of course I-pass in Illinois has already been used in court to track people.

    So, libertarians want more expensive roads, and more government involvement tracking of citizens.

    Unintended consequences anyone?

    But, increasing costs and decreasing liberty is probably just icing on the cake to Post-Buckley Libertarians!

    Actually, libertarians will just pretend they have no idea what this all means.

    No doubt, no doubt at all.

    After all, Reagan, the man that forced all states to tow the line on speed limits and drinking age is a hero to you (anti) liberty folks.(and also could be said to be directly/indirectly responsible for random road blocks by his judicial appointments who like the idea so much.)

  54. Instead of a gas tax holiday they ought to suspend(abolish) the requirement for summer formula “boutique” gasolines. That would reduce the price substantially.

    The “SIV proposal” reduces production and transportation costs and fosters competition.

  55. I would not advocate that government is a more efficient provider of roads than the private sector, anymore than they are efficient at any other resource distribution in comparison.

    My argument against privatization rest on this and take as a given that the system we have is Byzantine, takes up a huge amount of land and resources, but on the other hand is actually functional as presently conceived.

    How would you switch over from a public ownership to private without favored benefactors receiving the resources that the public already has
    a huge investment in? I would love to have a strip of I-85 too, but if the government were to sell me that strip on the condition it is now my responsibility to maintain, but I may toll as I wish, the public would be ripped off both in sunk cost and their piece of the profitability of that resource. Sure, you could set up a system here the public gets part of the split, but could ever really be a proportioned compensation?

  56. Drop ethanol blend mandates too. Gas will cost less and miles per gallon will improve.

  57. Unlike McCain’s proposal, SIV’s proposals at least have a chance of lowering the price of gasoline at the pump, though it may be too late for some of these as refineries are already in the midst of switching to summer blends.

  58. bleh.

    Sure, you could set up a system here the public gets part of the split, but could ever really be a proportioned compensation?

    Sure, you could set up a system where the public gets part of the split, but could that ever really be a proportioned compensation?

  59. MikeP,

    Even with the refinery switch to summer gasoline dropping the mandate for State and region specific blends will reduce transportation costs and increase competition.

  60. SIV,

    It kind of hoses the refineries who have already made the switchover to regional blends. But at least it hoses them less than the McCain inanity would profit them.


  61. It kind of hoses the refineries who have already made the switchover to regional blends.

    Politically: that’s not a bug but a feature.

    They’ll still sell the stuff at market prices,only with a bigger market and more competition.

  62. There are toll roads all over the place in Japan. And extensive rail transit

    Outcome: huge rail uses.

    Any time you have the kind of population density Japan has, rail makes a lot more sense and gets used a lot more.

    I suspect the mountainous terrain in much of Japan also plays a role.

  63. This is why the most pernicious threat to American liberty is the 3-year Election Season.
    My god, are we there yet?

  64. Probably, RC. Even in the northeast corridor, it’s doubtful we’d ever get to Japanese levels of transit-share.

    But we would certainly move in that direction, if roads were pay-as-you-go.

  65. Of course JM is a fool for suggesting the holiday tax.

    Not that I like the idea, but it’s a “tax holiday.” Not a “holiday tax.” Jesus, don’t give politicians the idea of taxing holidays. Next thing you know they’ll want to tax weekends. And then from there it’s any day of the week that ends in “Y.”

  66. Joe, Japan is just a bit smaller than the US.

  67. Some of these commenters are hilarious. “I use roads so that government program is OK.” Hey, if you’re only in favor of government programs you use, fine, but don’t go calling that libertarianism. You’re just another welfare momma lining up for your check.

  68. JB, the US has nine million sq km, Japan about three hundred thousand.

  69. Whenever I start to get confused as to the differences between paleos and cosmos, along comes some ex-Reason bigwig to set me straight. If it wasn’t for the fact that he once spilled coffee on me at an LP convention, I would never have guessed that Bob Poole was a libertarian.

    OMG! McCain wants to cut taxes! Raise the drawbridge! Man the barricades!

  70. Joe, Japan is just a bit smaller than the US.

    Just a bit.

    From north to south, it’s as long as one of our coasts.

    Which is just about the size of a rail corridor that can be operated successfully.

  71. But we would certainly move in that direction, if roads were pay-as-you-go.

    Actually, the gas tax is a pretty good proxy for pay-as-you-go on roads. Plus, it covers all the roads, not just the toll roads, and it doesn’t require ubiquitous tracking of your movements.

    But it is highly interesting that Libertarians would put their focus and requesting that state governments use tracking on all of their citizens to achieve “funding”.

    No shit. Booth-free tolling registers your movements in a state database. Why the fuck would anyone concerned about the growth of the Total State want that?

  72. One of the biggest problems with gas taxes (albeit mostly at the state level) is that the revenues get siphoned off into the general fund to pay for all sorts of nuttiness having nothing to do with transit of any type. It’s the infamous “lockbox” issue.

    I have no problem with tolls on major freeways, but I’ll readily admit that roads (and other forms of transit) are basically natural monopolies that are an appropriate form of government activity. Most privately operated/built toll roads are done so under an exclusive government charter of some type. In other words, I couldn’t go in and build a parallel road right next to the Dulles Greenway here in the D.C. area and charge less for the ride.

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