The Federal Highway Trust Fund will live on for another 6 months or so:
In April, Mr. Obama sent Congress a proposed transportation program that would spend $302 billion over four years, financed both by traditional gasoline taxes and the elimination of some corporate tax breaks. Senator Bob Corker, Republican of Tennessee, and Senator Christopher S. Murphy, Democrat of Connecticut, also proposed an increase in the gas tax to make up for more efficient cars and trucks that have sapped tax revenues as infrastructure needs have soared.
But Republican leaders have adamantly opposed anything that looks like a tax increase. Few Democrats have embraced Mr. Obama’s plan in an election year either.
The path to averting a funding crisis now appears clear, Senate Democratic and Republican aides say. With legislative days running short, Senator Harry Reid, Democrat of Nevada, the majority leader, is likely to ignore the bipartisan highway funding bill that emerged last week from the Senate Finance Committee and put the House’s version to a vote, likely just before the long August recess. That would obviate the need for House-Senate negotiations to iron out the differences between the bills.
The House’s overwhelming passage — 181 Republicans joined 186 Democrats to vote yes — was another in a series of defeats for conservative groups like Club for Growth and Heritage Action, the political arm of the Heritage Foundation, both of which had said they would score lawmakers negatively for voting for it. The most ardent conservatives have said the highway fund should go broke and responsibility for highways and bridges should return to state and local governments.
The latest proposal [for the Federal Highway Trust Fund ], which passed the Republican-controlled House Ways and Means Committee on Thursday, works like this: If you change corporate pension funding rules to let companies set aside less money today to pay for future benefits, they will report higher taxable profits. And if they have higher taxable profits, they will pay more in taxes over the 10-year budget window that Congress uses to write laws. Those added taxes can be diverted to the Federal Highway Trust Fund
Unfortunately, this gimmick will also result in corporations paying less in taxes in later years, when they have to make up for the pension payments they’re missing now. But if it happens more than 10 years in the future, it doesn’t count in Congress’s method for calculating budget balance. “Fiscal responsibility,” as popularly defined in Washington, ignores anything that happens after 2024.
A higher gas tax and tolls also happen to be fiscally responsible.
2. Remember when states were in charge of environmental policy? I don't either since it was before 1970, but I've read and taught that it didn't work so well. States competed for firms by having low environmental standards. So, how would this work if states were in charge of their portion of interstate highways? My guess is that it wouldn't work out well as some states competed to attract firms with better roads and others competed with by having crappy roads (the motivation for this is something I don't really understand).
The California Legislature is looking at a voluntary program that would tax motorists for every mile they drive.
KCAL9’s Bobby Kaple reports that Sen. Mark DeSaulnier, D-Concord, introduced a bill to test out the vehicle miles traveled (VMT) tax because the state’s gas tax was no longer bringing in the revenue it used to due to people driving more fuel efficient vehicles.
It's been almost exactly 7 years now (May 8, 2007) and people still aren't listening to me.
Taxing miles creates perverse incentives for fuel efficiency. A $0.015/mile tax (the size of the tax mentioned in the article) is the equivalent of a $0.015 * X tax per gallon where X is mpg. In words, a mileage tax increases the tax per gallon the more fuel efficient the car. Now granted, with higher mpg you use fewer gallons to drive an equivalent number of miles, and in the end, everyone driving 100 miles will pay the same tax. And from a revenue perspective, that might be OK. But there might be a way to kill fewer birds with one stone.
As I have written a number of times, a more straightforward proposal is to simply raise the gas tax. Reaising the gas tax accomplishes a number of things 1) It raises revenue, 2) It discourages miles driven, and 3) It increases the incentive for higher fuel efficiency.
Because my previous posts on this have been written with an ironic twist (I propose a mileage tax that is inversely proportional to fuel efficiency and then show that such a tax is the equivalent of a $1/gallon gas tax), here's the direct, non-ironic version: A $1/gallon gas tax...
...places a higher burden on those driving less fuel efficient vehicles--that should satisfy those blaming the SUV drivers for all of the problems*.
...places a higher burden on those driving more. By increasing the marginal cost per mile driven, total miles driven should decrease.
...assuming fuel efficiency and income are negatively correlated--that is, the rich tend to drive larger, more expensive, less fuel efficient cars--[higher gas taxes] place a higher burden on higher incomes.
...provides an incentive for drivers to switch to more fuel efficient vehicles.
It's really simple. Why worry about complicated milage programs? The gas tax infrastructure is in place. Raise the gas tax and meet multiple public policy and economic goals simultaneously.
This recent post on MIT's Tech Review provides an interesting technology solution and information asymmetry problem in the same article.
The basic problem is that most electric vehicles will require overnight charging so that they are ready when the owners need their cars for the morning commute. Any given grid will have a certain amount of excess capacity which it can devote to this problem. But if the number of cars is large, it cannot charge them all.
So the idea that Yingjie and co explore is to find a fair way to charge as many as possible with minimum disruption.
Their system is fairly efficient. The math is pretty intense in the actual paper, but the takeaway from their algorithm is this:
“The proposed scheme needs only 5 per cent more than the power demanded to ensure all the vehicles departing with delay in a few minutes,” say Yingjie and co.
But as always, incentives matter.
But there is a potential problem. It’s not entirely clear that users would be honest about their requirements, perhaps saying they will leave earlier than planned and that they have a longer commute, to ensure a full charge. In fact, it’s hard to imagine that people would not attempt to game such a system.
And therein lies a fundamental problem for humanity– how to distribute a limited resource fairly.
This is where economists can assist. First, although this is not addressed in the article, I think that worries about such a system exacerbating our electricity usage and therefore pollution are warranted...without a carbon tax or cap and trade system. Instituting a price on carbon would mitigate the potential for carbon-intensive energy production beyond the optimal quantity. See here, here and here for details on the why and how.
Second, I think that the problem of information asymmetry here is an interesting one with a few potential solutions. Any solution for this problem assumes that we want to allow power companies or some benevolent regulator to know what time we need our car in the morning. I'll assume that this is part of the agreement we sign when we agree to do business with our electricity provider. In order to provide incentive for users to provide accurate information, economists typically decide to subsidize those who provide accurate information or tax those who are dishonest.
The potential problem with this is that we cannot always predict exactly what time we're going to leave in the morning. If the baby gets sick in the night and we have to leave early for a doctor's appointment or the alarm doesn't go off and we leave late to work, we end up having to pay a penalty that may seem unfair. My first thought is that instituting a tax system for inaccurate predictions with a certain number of passes for each customer to allow for emergencies or "bad days" might work. The tax curve would have to fit with the additional cost spinning up the additional power sources for increased capacity.
An implicit tax might work better (from a behavioral point of view) by providing a "decreased rate" for those who are consistently accurate in their predictions. Both of these policies could be used in conjuction with the findings of California's behavioral electricity billing tests for an overall more efficient grid. Thoughts?
The NC legislature just doesn't like people who drive electric cars:
The state Division of Motor Vehicles has begun collecting a new $100 annual fee from the owners of all-electric cars ...
The House blocked a similar proposal from the Senate last year to charge a $50 fee for hybrid cars such as the Toyota Prius and Chevy Volt, which run on a combination of electricity and gas or diesel fuel. Only 1,600 electric cars are registered statewide, but their numbers are growing. ...
Fuel tax collections are declining because North Carolinians are driving less, their cars are getting more miles out of every gallon, and some drivers are switching to cars that burn no fuel at all.
DMV began adding the new fee for electric cars to its bills for registration renewal fees that were due this month. Projected collections from the fee – $160,000 this year – won’t do much to fill the widening gap between the state’s transportation needs and the revenue collections to pay for them, which is expected to reach $60 billion over the next 30 years.
The $100 fee isn't all that much but there really is no reason to add it on to the tax bill for electric car owners. It doesn't raise much revenue and it goes against the idea that we should encourage fuel efficieincy. If all drivers should pay for road maintence and the payment should increase with miles driven, without a penalty for fuel efficiency, then maybe the most efficient tax would include a fixed amount for all drivers. In other words, vehicle registration in North Carolina should go up by $50 or $100, or whatever it takes to close the revenue gap, for all car owners.
Gale warnings are posted on Hatteras Island, and that means more ocean overwash is likely for N.C. 12 – but probably not enough wind and waves, this week, to close the barrier island highway.
Weather and road conditions are important for repair crews working on an old bridge that takes N.C. 12 over Oregon Inlet; and for engineers preparing to build a new bridge on N.C. 12 south of there on Pea Island; and for Outer Banks folks planning to attend public hearings that will help the state decide where to put a second new bridge a few miles farther down N.C. 12, at the Hatteras Island village of Rodanthe. ...
One option is to keep the highway where it is but lift it up on a 2.5-mile bridge, high above the dune line. The other is to put it onto a 3-mile bridge that would curve out into Pamlico Sound and return to the present N.C. 12 path at Rodanthe. ...
SUMMARY: Rush-hour drivers in congested U.S. cities are increasingly facing a stark choice: stay stuck in traffic or pay to get in the fast lane.
CLASSROOM APPLICATION: Driving on congested highways creates a negative externality; and pricing highway travel according to the amount of congestion improves economic efficiency. Instructors can create a simple scenario of a two-lane highway in which one lane has a fee and the other does not. Using this simple scenario, instructors can make students begin to consider the following issues about fast-lane pricing: the decision about which lane to travel depends in part on opportunity cost of time; sorting by travel time according to opportunity cost of time improves economic efficiency; and the price that maximizes state revenues from fast-lane pricing may not be the efficient price.
QUESTIONS: 1. (Introductory) Does driving on a congested highway create a negative externality?
2. (Advanced) Suppose that adding a new driver to a fast lane reduces the wellbeing of drivers currently in the lane by $8, while deleting a driver from a substantially congested lane increases the wellbeing of drivers currently in this lane by $10. The greatest utility increase of any of the drivers currently in the congested lane from moving to the fast lane is $3. What is the greatest price a highway administration could charge for fast-lane driving that motivate any driver to shift from the slow lane to the fast lane? If those currently in the fast lane could veto any lane shift, what is the smallest payment they would accept for a shift into their lane? For an efficient lane shift, would those currently in the slow lane need to subsidize a lane shift?
3. (Advanced) Does fast-lane pricing improve economic efficiency? As the slow lane becomes more congested, should the price of the traveling in the fast lane increase?
4. (Introductory) Why are some drivers objecting to fast-lane pricing? Does the introduction of fast-lane pricing harm those who continue to drive in the slow lanes?
Reviewed By: James Dearden, Lehigh University
And this one is to get a puerile giggle out of Tim:
"Our revenue streams are flat or declining," said Anthony Tata, transportation secretary of North Carolina, which is proposing HOT lanes for a section of highway near Charlotte. "We have to consider flexible options."
“These government elitists design their user fees from their air-conditioned offices in Raleigh, and they do so with their lattes and their contempt, and chuckle while the good people of Charlotte are fighting hard to scratch out a living there based on cheap commutes and based on access.”
And you thought the debt ceiling fight was about government spending ... ha! it's about water resources:
For the second week in a row, the House will consider legislation aimed at boosting federal funding for a water project along the Kentucky and Illinois border.
Last week, the House and Senate approved a debt-ceiling bill that authorizes up to $2.9 billion for the Olmsted Locks and Dam Project on the lower Ohio River. That's a $1.2 billion increase above the project's current authorization level, a bump that prompted some to criticize it as a "Kentucky kickback" for Senate Minority Leader Mitch McConnell (R-Ky.).
This week, the House will take up legislation that would increase the extent to which taxpayers pick up the cost of the project.
Under current law, water projects around the country are paid for through a 50-50 split between taxpayers and the Inland Waterways Trust Fund. That fund is similar to the gasoline tax for automobiles — a fuel tax is assessed on inland waterways users, and the money is used to maintain and repair those waterways.
The Water Resources Reform and Development Act, H.R. 3080, includes language in Section 216 that would require taxpayers to shoulder 75 percent of the costs for the Olmsted Project, instead of 50 percent. Under the bill, the trust fund would pay for the other 25 percent.
That bill could get a final House vote as early as Wednesday. If Section 216 remains intact, taxpayers will pay for $900 million of the
SEC. 216. PRESERVING THE INLAND WATERWAY TRUST FUND.
(1) IN GENERAL- Notwithstanding section 102(a) of the Water Resources Development Act of 1986 (33 U.S.C. 2212(a)), for each fiscal year beginning after the date of enactment of this Act, 25 percent of the cost of construction for the Olmsted Project shall be paid from amounts appropriated from the Inland Waterways Trust Fund. ...
Once again, I'm reminded to be very careful about what I post here:
Suppose, for a moment, that the people who run your local government really cared enough about you and your fellow citizens to do something that might actually benefit you, by funding a fancy transportation project that could shave 13 minutes off your time while commuting once it's done.
Is it worth it?
The answer, at this point, is "it depends". And honestly, what it depends upon is what your and your fellow commuters' time is really worth.
That's why we've created the tool below, so you can see how much you're saying your time in traffic is worth if the project goes forward! Just enter the indicated data in the tool below, and we'll do the math....
All the default numbers in the tool above are taken from a federally-funded transportation project in North Carolina, which promised to spend $461 million to reduce the travel time of some 100,000 train commuters between Charlotte and Raleigh by 13 minutes a trip, which would bring their one-way transit time down to just under three hours. We then adapted the math developed by John Whitehead for determining the benefit-cost ratio for the project to estimate what value per hour saved per individual that the state's politicians were assigning to the primary declared benefit of the project.
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Don't believe what they're saying
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