Mike Shedlock
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Yet another "Trust Fund" is broke. This time, discussion involves an alleged "Transportation Trust Fund".

As with Social Security, there is no "Transportation Trust Fund", only a stack of unmarketable IOUs from one branch of government to another.

If there is any trust in the system, there shouldn't be, and soon won't be. Obama will surely see to that.

Grid Chicago reports Charging by the mile, a gas tax alternative, sees serious movement.

Because of vehicles with higher fuel efficiency, slightly less driving, and the gas tax not being changed since 1993, the motor vehicle fuel tax, or “gas tax”, has failed to pay for everything that Congress has legislated that it should pay for. The Highway Trust Fund, which includes the Mass Transit Account, has received several infusions of money from the “general revenue fund” – to the tune of over $60 billion.

But a new report from the Government Accountability Office, the congressional think tank focused on financing, past, present, and future, has made the country take a giant step forward in considering a switch to a fee that more accurately charges usage. The report, like all GAO studies, was commissioned by the House Transportation Appropriations Subcommittee.

The gas tax charges drivers based on their use of petroleum, different vehicles can go different distances on the same amount of petroleum: essentially, some pay less than others for the same use of the road. Additionally, the counts of how much people drive has decreased (called vehicle miles traveled, or VMT), yet our demand for funds to maintain and build new infrastructure outpaces the incoming revenues from the gas tax. Lastly, the federal gas tax hasn’t changed at all, sticking to a cool 18.4 cents per gallon (for non-diesel drivers) since 1993. ”While the gas tax was equal to 17 percent of the cost of a gallon of gas when it was set at its current level in 1993, it is now only 5 percent” (Streetsblog).

The Simpson-Bowles Commission, convened by President Obama to find strategies to improve the country’s fiscal situation in 2010, “called for an immediate 15 cent-per-gallon increase in the gas tax”.

An alternative to the gas tax is to charge people based on how much they drive, a mileage fee. This can be calculated in more than one way, and doesn’t require the use of a GPS system to track where people are going: pay-at-the-pump (or electric vehicle charging station), and prepaid, self-reporting system based on odometer readings.

Mindless Possibilities

Got that? Bureaucrats are actually pondering a system that would require road use prepayment based on self-reporting of miles driven.

It's always important to keep in mind that the bureaucrats have an infinite capacity to do mindless things. How many bureaucrats will it take to manage a self-reporting system? At what cost? Who will comply?

When that proposal does not work, (and obviously it won't), bureaucrats are likely to do something such as mandate devices in cars that will communicate with devices at gas pumps, tracking your every move.

Such devices will no doubt be manufactured by GE who will be the big beneficiary of it all in terms of profit. Meanwhile the actual manufacturing jobs for such devices will go to China.

Gas station owners and car manufacturers will both have to install such devices at great expense.

While pondering the ramifications of mindless possibilities, let's also take a look at proposed costs. Keep in mind things always cost more than proposed.

Scheme to Boost Taxes 250%

The Examiner reports New pay-per-mile scheme would boost taxes 250 percent

An on-again, off-again move by the Obama administration to scrap the federal gas tax in favor of a pay-per-mile fee would boost the tab to Americans as high as 250 percent, raising their current tax of 18.4 cents a gallon to as high as 46 cents, according to a new government study.

But without a tax increase, said the Government Accountability Office study, the government's highway fund is going to go dry. One reason the fund is going broke: President Obama's push for fuel efficient cars has resulted in better mileage, and fewer stops at the pump.

The GAO study is just the latest review of federal spending that paints a grim picture of the nation's infrastructure. Just keeping spending at current levels, the GAO said, would require a near doubling of the gas tax to 32 cents a gallon, and that would jump to as high as 46 cents should the federal government add spending to fix crumbling infrastructure and build new roads.

Obama Mulls Replacing Gas Tax With Hefty Mileage Tax

Political Outcast has some choice comments on the idea in Obama Mulls Replacing Gas Tax With Hefty Mileage Tax.

One reason gas prices are so high is that the Feds impose a tax of 18.4 cents per gallon on gas. It’s 24.4 cents per gallon of diesel. We’ve had federal gas taxes since the 50’s to pay for highways and bridges, but since 1983, they started diverting about 20% of gas taxes to go to a Mass Transit Account that is supposed to pay for public transportation like buses and railways. So, those of us who don’t use mass transit are paying for those that do in the form of gas taxes. That’s socialism for you.

We’ve had the 18.4-cent per gallon tax since 1993 under the Clinton administration. Nowadays, with the further destruction of the dollar, that 18.4 cents just doesn’t buy what it used to. Now, the Highway Trust Fund (which includes the Mass Transit Account) is facing insolvency.

Some credit the loss of revenue to the fact that many are using more fuel-efficient cars and therefore not spending as much on gas. Isn’t that what Obama wanted? For people to use more “green” energy? And now, the Highway Trust Fund is running out of money.

That could be part of it, but billions of the gas tax revenues are used to fund pet mass transit projects, which those who drive cars generally don’t even use.

If states want to have public transportation, they should raise their own revenue and pay for it themselves instead of taking federal highway funds to build it. As for paying for highways and roads, we could cut hundreds of billions of dollars from Obama’s foreign policy expenditures and put those funds toward domestic infrastructure and not have to impose one penny of gas taxes to fund it.


Robbing Peter to Pay Paul (With IOUs of Course)

Political Outcast gets to part of the problem.

However, I am not opposed to the idea that people who use services should pay for them. But why stop at roads?

Why shouldn't people who use libraries pay for that usage, rather than everyone else? Why should Social Security recipients get out more than they paid in? Why shouldn't mass transit users be the ones to pay for mass transit?

Most importantly, why don't people with kids in the public education system pay for the cost of the schools and their kid's education?

If they did, I assure you costs would come down because people would demand more for their money.

Next Set of Questions

  • What the hell are taxpayers getting for their money?
  • What do pension plans of those working for the Department of Transportation look like compared to the average Joe?
  • What do the wages and pension plans of road maintenance workers look like compared to the average Joe?

Before we go about charging people for miles driven, how about making sure taxpayers get their money's worth in services received?

For road maintenance, the way to do that is easy. Scrap Davis Bacon and all prevailing wage laws, then let cities and states put out bids for work at non-union rates.

If the states and federal government would scrap all prevailing wage laws and make recipients in general pay for services received, I will be more than happy to discuss better ways of making drivers (and everyone else) pay for services received.

Camel's Nose in the Tent

As an addendum, I offer reader "Lapdog" comments ... "A miles driven tax is just the camel's nose in the tent. It will ultimately be a GPS/vehicle-based system that will allow charging more based on time of day, type of road taken or where one wishes to go i.e. into downtown business districts."

Precisely. The possibilities for more taxes, and more tracking of everything you do, while under guise of making people pay for services are infinite.

Moreover, both parties want to keep track of everything you do under guise of protecting against terrorists.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 
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Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.
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