Continued from Part One.
Our view, on balance, is that the tax should be maintained and could indeed be increased, although a phased increase makes obvious sense in the current climate.
The highways have to be paid for and they will be paid, one way or another, out of taxes. A fuel duty is a much cheaper method of raising tax to administer than tolls and less disruptive on the flow of traffic in congested areas. Improving vehicle fuel economy, inasmuch as it is encouraged by slightly higher fuel prices, has benefits for the country’s import bill, not to mention air pollution and climate change to the extent you accept the part cars may play.
We were (at the time of the US stimulus measures) and still remain strong advocates of infrastructure spending as a way of stimulating economic activity, investing for the future and improving industry’s long-term competitive position by providing rapid and efficient transportation speed and reliability can outweigh a small increase in cost. Providing the federal gas tax continues to be spent solely on highways, bridges and transportation, it makes sound sense, both economically and broadly in terms of what the user pays.
However, a lot of water has to pass under the bridge between now and the end of September when the current regime expires. As we saw with the budget deficit, there is a new recklessness in Washington to use any deadline as a political bargaining chip regardless of the wider ramifications. The consequences of a delay in this case are nowhere near as serious as the deficit negotiations, but for users of the country’s highways and bridges, and for the sometimes maligned yet critically important road haulage industry, the decision to extend, increase or remove the federal gas tax will have important implications, both now and in the years to come.