Opinion: Post pandemic, how can we 'fix the damn roads'?

Gary Wolfram

The COVID-19 crisis has been the main driver of news of late. The effect on small business, unemployment, the stock market and other economic indicators of the shutdown has been well-documented. 

One thing that has not had as much coverage is its effect on the ability to, as Gov. Gretchen Whitmer phrased it, “fix the damn roads.” 

The American Society of Civil Engineers produces an Infrastructure Report Card every four years. The most recent one, in 2017, found that America’s infrastructure has a grade of D+. Roads received a grade of D. 

In addition to the widespread damage to families and individuals, the closing of many businesses and the massive drop in demand for those that do remain open is going to have an effect on revenues available for the federal government and state governments to fund road infrastructure.

In this Thursday, March 21, 2019 photo, a sign warns drivers about potholes in Montpelier, Vt.

A major direct source of revenue for roads in the United States is a tax on gasoline. With people self-quarantining, there is far less gasoline being used today. Gasoline sales at retail stations for the week ending March 26 were down 46% from the prior year.

When funding government services it is most efficient if people pay the cost of using the services. This is the way the private market works. For many government services this is not possible. One way to approximate what happens in private markets is for people to pay a tax on something that is correlated with the use of the service. 

The gasoline tax is an example of this. In general, people who drive more, and thus use the roads more, will use more gasoline and thus pay more in taxes than those who use the roads less. Thus, an increase in the federal gasoline tax to assist in rebuilding the country’s infrastructure is something to be considered.

Over time, fuel economy has been increasing, some of it mandated by the federal government’s corporate average fuel economy standards. The result is that the price drivers pay per mile to drive on roads has fallen substantially. The federal gasoline tax currently is at 18.4 cents per gallon. It has not been increased since 1993 and with gasoline prices at levels not seen in years — $1.80 per gallon on average nationwide — this is a reasonable time to consider increasing the tax in order to fund roads and bridges that are in ill-repair.

In addition to an increase in the federal gasoline tax, we should consider other methods to fund roads, particularly those that are consistent with the user-fee analogy above. In some states a weight-distance tax is charged for trucks, so that trucks that are heavier and thus create more wear on the road and that drive more miles in the state pay more for the use of the roads. The federal government currently charges a 24.4 cent per gallon tax on diesel fuel. Perhaps it could add a weight distance tax as well.

There is also the challenge that electric vehicles do not use gasoline and thus don’t pay for use of the roads under the current system. In the long term, it is certainly possible that all vehicles will have a device that is attached to their license plate — like a number of toll roads across the United States — that will automatically charge per mile. In the meantime, it may make sense for electric vehicles to pay a tax to the federal and state governments based upon number of miles driven each year when the vehicle owner pays the annual registration fee at the state’s department of motor vehicles.

An increase in the gasoline tax, the imposition of a weight-distance tax for trucks and a tax per mile driven for electric vehicles are reasonable and probably necessary measures to deal with America’s deteriorating roadways.

Gary Wolfram is the William Simon Professor of Economics at Hillsdale College.