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VIEWPOINT: How to win Uncle Sam's gas-tax shell game

August 25, 2008

Between 1956 and 1991, Indiana motorists willingly paid "temporary" hikes in the federal gasoline tax, knowing the money was being used to build the 42,000-mile interstate highway system. In 1991, Congress declared the highway system completed-but the tax lived on and on, growing bigger and bigger.

No longer needed to build the interstate, the current 18.4-cents-per-gallon federal gas tax-double what it was in 1990-now funds a "highway trust fund" shell game that shifts $866 million a year, and control over highways, from Indiana to Washington, D.C.

Here is how Indiana motorists would be better served by convincing Congress to repeal the obsolete federal gas tax and returning control over highways to state and local governments:

State control. Road-building is historically a responsibility of state and local officials, who are in a better position than Uncle Sam to determine the transportation needs of their motorists. But as long as Washington holds the purse strings, Indiana and the other states will be denied control over their own affairs.

If lawmakers in Indianapolis could decide how much of the current federal tax should be added on to the state's own 18-cents-per-gallon tax, the unified state gas tax could then be raised and lowered to reflect Indiana's, not Washington's, transportation priorities.

Misallocation of funds. Compared to Washington, most states do a better job ensuring their gas taxes are used for highway improvements. Of the $884 million in state gas tax revenue collected by Indiana in 2005, all but $483,000 was used for state and local roads-a far better track record than Uncle Sam's.

According to Ronald Utt, a senior research fellow at the Heritage Foundation, each year Washington doles out more than one-third of its gas tax revenue for nonhighway projects related to such topics as air quality, traffic congestion, bicycle-path projects and hometown pork projects.

Higher costs. Cycling the federal gas tax collected in Indiana to Washington and then back to Indiana also adds costly federal labor, environmental and other regulations-expensive hoops state road builders must jump through to get their money. And don't forget that hundreds of millions of federal gas-tax dollars are wasted each year funding bureaucracies in Washington that duplicate the work of state highway bureaus.

Special-interest clout. Centralizing the $33 billion in federal gas tax revenue flowing into Washington each year makes it easy for interest groups and lobbyists to sway members of Congress to send money their way. If that $33 billion were instead spent by 50 separate state legislatures, more money would go directly to serving the motorists who paid the taxes. It would be far more difficult for greedy interest groups and lobbyists to rip off money in the 50 state capitals.

In Washington, right off the top, 2.86 cents per gallon in gas-tax revenue goes to mass-transit projects. And perhaps the most outrageous raid on the federal gas tax occurred in the mid-1990s, when 6.8 cents per gallon was siphoned off to pay down the federal budget deficit.

What to do? Sen. James Inhofe, ROklahoma, in 2003 offered a bill in Congress to return all but 2 cents (to cover federal maintenance responsibilities) of the 18.4-cent federal gas tax to the states. This bill, he said, would "restore to states and local communities the ability to make their own transportation decisions without the interference of Washington."

Indiana motorists don't need a federal gas tax holiday this summer, as suggested by some would-be presidents. They need the obsolete federal tax repealed and control over highways returned to state and local officials.



Fraser writes on public-policy issues for the DKT Liberty Project, a Washington-based civil liberties organization.
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