Thoughts on Funding Transportation Projects

The other day I was thinking about how difficult it is to fund transportation projects. There's probably an entire field of public policy research on this subject, but I'm going to go ahead and speculate that it has to due with it being such a large capital outlay over a short period of time and how that's tough to finance. Probably has something to do with the fact that it's easier to spend money that make money, even if you're a government. So usually these get funded by selling a lot of bonds and getting paid for over time from existing tax revenues.

But what if you could do it another way? I'm not arguing for higher taxes overall, those do suck for numerous reasons. Small, short-term taxes have a way of sticking around long after their original purpose (everyone's favorite example being the Federal Excise Tax on Long-Distance Telephone Calls). But what if it was a REALLY big, short-term tax? So big that no politician could dare continue it and so short-term that it would be over before outrage could really get going. Afterwards, it's a thing of the past and you've raised a lot of revenue.

So here's what I'm proposing: a one-week-long, $1.00 per gallon tax increase on gasoline sold in the state of Maryland with all revenue ear-marked for capital investment in the Red Line and Purple Line transportation projects.

Crazy, right? People would just not fill up on gas for a week, right? I'm not sure. Think about it though, not everyone can go a full week without filling up their cars with gas. Many people would probably dodge across state lines to Pennsylvania, Delaware, West Virginia, or DC to fill their tanks (Maryland is really poorly shaped for this idea - it'd work much better in a big square state like Colorado). And it's a little unfair to steal tax dollars from Eastern Shore residents to fund projects in the DC suburbs and Baltimore region. So maybe we have to come up with some way to split up the money so that Western Maryland and the Eastern Shore get some of the revenue. Those are details, most of the revenue will come from the Baltimore-Washington corridor and it will be spent there for building mass transit.

How much money could this tax raise? If you look at the numbers from 2007-2008 (latest data available from the state of Maryland), Marylanders sell something like 250 million gallons of gasoline every month. So given that people would probably really cut back on their driving/gas purchasing for that week, you'd probably raise around $50-75 million in revenue. To put that in perspective, that's equivalent to 6-10% of additional gasoline tax revenue. That's not a whole lot of money compared to the cost of the Red Line and Purple Line projects, but it's also a pretty painless cash grab. People might grumble, but it'd be over almost as quickly as it started.

The best time to run this would be over Memorial Day Weekend or Labor Day Weekend - lots of out-of-state drivers going up and down I-95 means lots of revenue from non-Maryland residents. Beggar-thy-neighbor? Just a bit, but states do this all the time (i.e. Delaware's I-95 tolls).

I'm not saying it's economically efficient - it probably falls too heavily on businesses and trucking. But it would do two things: cause a steep, one-week-long drop in emissions and raise money for desperately needed transportation projects (that would also reduce emissions).

Realistically, we ought to be increasing the tax on gasoline anyway (although not to endlessly expand I-270 as Montgomery County wants), Maryland hasn't touched it since 1992 and it's set as a price per gallon tax (that is, it is not indexed to inflation or the cost of a gallon of gasoline). Sure, taxes in Maryland are higher than nearby states, but the state also needs the revenue and for the sake of the environment we need to make gas-powered vehicles less attractive modes of transportation.

In the meantime, I'll keep trying to think of creative taxes that raise revenue without causing a lot of pain. I think this idea has some real merit. Maybe I'll be able to think of some others.