Funding Texas’ Transportation

Traditionally in Texas, transportation infrastructure has been funded from the revenues collected from the gasoline tax. There are two parts of gas tax that is being collected in Texas. For every gallon of gasoline, there is 18.4 cents in federal tax and 20 cents of Texas state tax. The federal tax from all the states is collected into the Highway Trust Fund and is then redistributed back to the states. The state tax remains in the state, and is used to build new roads and bridges as well as to maintain the existing transportation infrastructure. These taxes have been in effect for more than a decade now, and have not been increased to account for inflation. Over this period, there has been a very high increase in the cost of construction, but not much increase in the revenue, leaving the state of Texas without enough money to build and maintain the infrastructure.

There are several issues with the traditional gas taxation. Firstly, with the increase in more fuel efficient, hybrid and electric vehicles, gas usage has gone down, and so has the gas tax revenue. Secondly, the current taxation system is not equitable. The taxation system currently charges based on the amount of fuel consumed, and not on the amount of miles driven. Third, unlike other taxes (sales tax, property tax, etc.) the gas tax is a fixed amount per gallon and not a percentage of the price of the gallon. The gas tax collected for Texas was 20 cents when a gallon of gas was less than one dollar, and it is still 20 cents when gas is generally more than two dollars per gallon.

All of this has resulted in the deterioration of the states highways and bridges and more congestion on some major routes. The toll roads that everyone is much opposed to are a result of the declining gas tax revenues along with increased transportation spending. Experts have provided several solutions for the current dilemma. One solution is to index the gas tax to bring it to current levels. Roughly speaking, this would double the amount per gallon. Second solution is to change it to a percent of the gasoline price similar to other taxes like sales tax and property tax. In addition to these two simple solutions, there is a more complex solution that solves most of the issues, but is relatively difficult to implement. In this method, the tax (or user fee) would be charged based on the number of miles driven, and not based on the amount of gasoline purchased.

In any case, the legislators need to seriously consider this issue and take steps to mend it before it gets worse. Transportation has been the backbone of the US economy, and every effort should be made to keep it strong.

Response to Scott's Corner post on "To Strike or not to Strike"

The commentary “To Strike or not to Strike” on Scott’s Corner provides a good perspective of the conflicts going on between the Capital Metro management and the union of workers. The author thoroughly explores the viewpoints from both sides and explains the explicit as well as implicit intents of the management and the union. All the aspects discussed are then put into the current context – the economic crisis in particular. The author’s suggestion that the union and the management should agree on a $1,000 bonus without a contract or with an addition of a 3% increase in the second year for a two-year contract is seemingly an intermediate option. Considering the current economic situation, where those who are getting laid off would rather take a pay cut, the above option seems reasonable. Also, since they are not committed for more than a year, they can renegotiate the terms at the end of a year when things could have improved. Also, like the author says, striking at this time is not the best course of action.

The current proposal seems to provide a good option but with a three year commitment. The current proposal is to provide $1,200 bonus in lieu of a raise for the first year, and then provide 3% raise for the second and third year. The catch here is that this raise does not come entirely at the beginning of the year but is broken down at every six months. That would mean that workers would get 1.5% raise every six months beginning from the second year. According to me, if the union is looking for a long term work commitment, the proposal from the management seems good, but if they want the ability to negotiate better pay once the economy improves, they should avoid getting into a three-year term, and try to negotiate something shorter.