US Transport Secretary Refuses To Sign Gas Tax Proposal

by Mike Godfrey, Tax-News.com, Washington

16 January 2008

US Secretary of Transportation Mary E. Peters has refused to sign off a report from a Congressional commission that she chaired, which has recommended a substantial increase in gasoline tax to shore up funding for America's surface transportation systems.

Secretary Peters announced on Tuesday that she and two other members of the National Surface Transportation Policy and Revenue Study Commission will not endorse its call for substantial state and federal gas tax hikes, and a first of its kind federal tax on all public transportation and intercity passenger rail tickets.

“Raising gas taxes won’t improve traffic congestion, it will only perpetuate our ineffective reliance on fossil-based fuels to fund infrastructure and send more of Americans’ hard-earned money to Washington to be squandered on earmarks and special interest programs,” Secretary Peters stated, continuing: “A better way forward is to provide incentives to states willing to pursue more efficient approaches and to invest federal funds more effectively to give commuters real relief from gridlock.”

Peters, along with Commissioners Maria Cino and Rick Geddes have refused to sign the final report of the Study Commission, which was created by Congress in 2005 to formulate new proposals for the funding of the US highway system. The Commission's work was given extra impetus following the collapse of a bridge in Minnesota in 2006.

In her statement, Peters said she was "deeply troubled" by the Commission’s call for an up to 40 cent per gallon federal gasoline tax increase over the next five years, rising to up to 91 cents in 20 years when indexed for inflation. She added that the report also assumes that states will increase their gas taxes by up to 60 cents per gallon over the next five years. She said recent studies, including one from the Government Accountability Office last summer, have concluded that gas taxes don’t work to reduce traffic congestion.

The Secretary, along with Commissioners Cino and Geddes, have as an alternative released their approach for addressing the nation’s transportation challenges. This “Chairman’s Statement” argued that transportation planners have "an unprecedented range of options available to them" to reduce traffic congestion, finance new projects and maintain existing transportation systems, and noted that many states are already using technology such as congestion pricing and high-speed open road tolling to raise revenue and reduce traffic tie ups. It also pointed out that there are billions of dollars in private capital available to transportation officials that could easily be tapped to finance new projects.

“There is nothing to indicate that Washington would do a better job spending billions more of the taxpayers’ money than it has so far,” observed Peters. “The answer isn’t more taxes and added layers of bureaucracy, it is having the courage to say the current system is broken and it is time to find a better way to invest in, manage and operate our transportation system.”

Bolstering the highway trust fund with higher gas taxes is an idea that has the support of some in Congress, but Chuck Grassley, ranking Republican on the Senate Finance Committee, which has jurisdiction over tax laws, recently labelled the special commission's proposal "an old, cold, bad idea".

"We have economists saying the increase in energy costs is adding to recession concerns, while this commission will say we should add to those concerns," he stated.

Grassley also argued that the commission had deviated from its original mandate, which was to propose non-tax alternatives to the long-term financial stability of the highway trust fund.

"Raising the gas tax puts the brunt of the long-term trust fund expenses on automobile drivers, when diesel trucks and other heavy vehicles also use the highways," he observed, concluding that: "The nation needs innovative ways to meet energy needs without sinking the economy.”

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