I often liken regulations, especially those that purport to create some form of social engineering, to balloons. You artificially distort the balloon in one area and you get a reaction in some other, often unexpected, area. You raise capital gains taxes and companies mysteriously move, you raise individual income taxes and people and knowledge mysteriously move... and tax revenues decrease.
In this edition of Fun With Statistics we take on another such anomaly: taxes required for road improvements.
The House passed legislation that would steer $8 billion to highway projects next year, in a prelude to a broader debate over how much to invest in roads, bridges and other transportation infrastructure. The bill passed Wednesday is essentially a stop-gap measure designed to plug a gap between fuel-tax revenue flowing into the federal Highway Trust Fund and funding promises Congress has made to the states. But it also spotlights a long-term problem confronting policymakers as consumers drive less and use more fuel-efficient vehicles.
Yes, that's right. A funding problem due to higher gasoline costs causing people to drive less. The free market at work... then distorted by tax policy. Just as you don't fool with Mother Nature, so shouldn't you fool with the free market.
Conservation means less gas-tax revenue is going into the Highway Trust Fund, which Congress taps every year to send transportation funding back to the states. Current estimates indicate the trust fund will take in at least $3 billion less than Congress planned to spend next year, and that deficit is expected to widen substantially in the years ahead.
Of course roads do need to be maintained, and in many areas they are in a woeful state. Money does need to be spent. Bad roads and insufficient capacity affects economic growth. The question is where to get the money. And there are some real pinheads in government who apparently don't even understand how the current shortfall happened.
To pay for new infrastructure projects, some lawmakers and industry groups say it may be necessary to raise gas taxes -- the current federal 18.4-cent levy on a gallon of gasoline hasn't changed in more than a decade.
D'oh! Who are these "lawmakers and industry groups?" Probably the same jokers angling for a bailout of the Detroit Three, convinced that since it didn't work in the past it will miraculously work in the future. Gas prices go up (via taxes or supply and demand) and consumption goes down so tax revenue goes down. But some see reality...
"The mechanism for financing highway and transit projects is obsolete," said Rep. John Mica (R., Fla.), in a statement. "In the long term, Congress must address this problem."
Time for another paradigm shift.