Unpopular View, but Correct (aka Kudos to Dagen)

Listening to "Bulls & Bears" on Fox News on XM Satellite Radio this weekend (note: Fox Business will get its own XM channel, 128, as of July 14th) I listened a debate about oil prices and the gas tax.     It was a discussion about whether McCain's idea to cut the gas tax for the summer is a good idea and what any economic benefit may be.

My co-anchor Dagen took the unpopular side that the tax should not be cut, correctly noting that the overall benefit to America of the 18.4 cent tax far outweighs any economic relief it may provide.   She was the only one of the panel on this side of the issue.  

The Federal Government collects about $38 billion per year for this tax, with states and localities about double that.   In total it's more than $100 billion per year in combined government revenues.   Certainly no small number.   But consider this: most of that money goes toward much needed road and infrastructure improvements.   This is one of the few taxes we pay that actually goes toward funding the underlying basis of the revenue.   Drivers need roads.  Drivers need gas.  Drivers help pay for their roads by buying gas.   Those who drive more, and thus benefit more from those roads, bridges and infrastructure, pay more.   Its a usage tax. 

Take note of this recent article in the Wall Street Journal:

Governments depend on tax revenue from gas purchases to fill the Highway Trust Fund, the main mechanism used to pay for public highway, mass transit and other transportation projects. While a prolonged dip in driving may eventually bring lower gas prices and other benefits, it is also creating a dilemma for policy makers.

Trust-fund revenue is projected to run a shortfall of at least $3 billion next year, meaning Congress faces a choice between cutting transportation funding and coming up with a fix. Many lawmakers have seen this problem coming, with oil prices rising and consumers increasingly opting for fuel-efficient vehicles, but no consensus approach has emerged.

I highlighted "coming up with a fix" for a reason.    Most of these highway improvements are non-negotiable.   Americans cannot have major transportation arteries shut due to lack of funding for improvements.   If encountering a bridge found to be questionable, inspectors will simply shut it down.   They cannot risk another Minneapolis disaster.   Thus, they must do the necessary improvements.   Expensive improvements.   The "fix" the article speaks of is clear: if the Highway Trust Fund doesn't secure enough money from gas tax revenue, it will have to come from another source.   Perhaps higher income, state or local taxes.   But it will come, and it will come from somewhere.  You simply cannot indefinitely delay needed infrastructure projects. 

Minnesota alone is planning 11 bridge overhauls at a cost in the billions.    Other states need even more work.  The loss of life and economic injury resulting from infrastructure destruction does a greater harm to economies than the benefit of a few more dollars in consumers' wallets.   A 15 gallon gas tank will save consumer just $2.75 when they fill up.   Does that balance against the time cost of money when you discover the bridge you use every morning to go to work is closed for a year because they've found structural problems they can't afford to repair?   Your detour would probably result in the same cost at the pump from using more gas stuck in traffic idling or taking a longer route to the office.

I am all for lower taxes.   I am also all for providing much-needed relief for Americans.  Congress and the candidates though need to find other ways to help the country and the economy.   One idea would be a lower sales and food tax.   Most families spend just as much or more on food they do on gas.   And every family eats.  Not all drive, or drive that much, especially in urban areas.  

Congess needs to cut taxes.   But they should not be eliminating one of the few taxes we pay that actually provides us with a direct benefit to our infrastructure and our safety.

Dagen took the hard line, one that's likely unpopular, but kudos to her especially when we all know there are no easy answers and likely face some tough choices ahead.