MONEY Taxes

As Gas Prices Go Down, Likelihood of Higher Gas Taxes Goes Up

It's no wonder that many are calling for higher gas taxes lately: Gas prices are the cheapest they've been in years, so a hike in gas taxes is less likely to drive drivers nuts.

Raising taxes is never popular. But if there was ever a way to make a tax increase more palatable to Americans, it would be with a tax hike that didn’t seem like much of a tax hike. Like, say, one that was optimally planned so that even after the tax increase was instituted, the average household wouldn’t feel like it was paying much more out of pocket than it was in the recent past.

Just such a rare opportunity is now upon us. Gas prices have plummeted—dipping under $2 per gallon in some markets, with further decreases likely—and some want to take advantage of the situation by jacking up the gas tax at both the state and federal levels. Depending on how high taxes are raised, drivers might very well still be paying less to fill up than they were a few months or a year ago. So in a way, at least theoretically, this is a tax hike that wouldn’t feel like a typical tax hike.

A recent Washington Post column pointed out that the federal gas tax has been stuck at a flat 18.4¢ since 1993. At the time, the price of a gallon of regular was about $1. “It’s been a generation since gas taxes were increased at all,” Paul Bledsoe, a senior fellow on energy at the German Marshall Fund, told the Post. “So they are incredibly low by historic levels.”

Over the years, many have called for increases to the federal gas tax, which has not kept up with inflation. “Inflation has effectively reduced the [gas] tax rate by about one third” over the last two decades, the nonpartisan Tax Foundation noted earlier this year. Most states have flat gas taxes as well, and critics say the revenues collected are falling well short of what’s needed to address our nation’s crumbling infrastructure. “At the state and local levels, gas taxes cover less than half of state and local transportation spending,” said Tax Foundation economist Joseph Henchman.

Again, there’s nothing really new about calls to raise more funds to fix roads and other infrastructure needs at the national and state levels. What is new, however, is that gas is the cheapest it’s been in years, and that projections indicate per-gallon prices will remain well under $3 indefinitely. Predictions call for a national average of $2.94 per gallon next year, which would be roughly 45¢ less than 2014 and 70¢ less what drivers typically paid in 2012.

Hence the fresh push to raise gas taxes while prices at the pump are inexpensive. As Elaine S. Povich of the Pew Charitable Trusts observed recently:

“Cheap gasoline makes such levies more politically palatable, since consumers are less likely to notice the extra burden when they are filling up.”

It must be noted that while the federal gas tax hasn’t budged in two decades, state gas taxes (and other local taxes that help support roads and infrastructure) have been increased fairly regularly. Pennsylvania, Wyoming, and West Virginia are among the states where gas taxes were hiked this year or last, and discussions are in the works to raise state gas taxes in Iowa, Utah, Michigan, New Jersey, Oregon, and beyond. Data from the American Petroleum Institute shows that nationally, drivers pay an average of 49.28¢ per gallon when state and federal levies are added up.

While it’s unsurprising that environmental supporters and academics such as Mississippi State’s Sid Salter are renewing cries for gas tax hikes while gas prices are cheap, it’s particularly noteworthy that some Republicans seem in favor of tax increases at this opportune moment in time as well.

Last month, U.S. Sen. John Thune (R-SD) actually criticized President Obama for refusing to consider a gas tax increase over the years. “I always thought that was ironic, that he’s willing to raise every other tax,” Thune said to the Rapid City Journal. “And then the one that actually pays for something you can see a direct benefit from, he doesn’t want to talk about it.”

More recently, Congressman Tom Petri (R-WI), who is retiring soon, it must be noted, announced he is sponsoring a bill to raise the federal gas tax by 15¢ to 33¢ by 2013. “No one likes taxes,” Petri said in a Huffington Post interview in early December:

“But the issue is whether we should pay for transportation, or cut back on spending and transportation and have less roads and poorer infrastructure, or borrow it from our kids — debt financing it and hoping someone pays the debt off at a future date. And of those choices, it seems to me that the most responsible long-term approach is to do the thing that is unpopular but necessary.”

It helps that the move won’t be quite as unpopular as it would be had the gas tax hike been introduced back when the average driver was paying $3.50 or $3.75 per gallon.

TIME Innovation

Five Best Ideas of the Day: November 24

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. A bipartisan plan in North Carolina shrunk prison population and cut costs while the crime rate continued to fall. Can it serve as a model for other states?

By the Justice Center at the Council of State Governments

2. In international development, the massively scaleable transformative idea is usually too good to be true.

By Michael Hobbes in the New Republic

3. Net Neutrality could have a big impact on the future of healthcare, from telemedicine to electronic medical records.

By Darius Tahir in Modern Healthcare

4. Today’s renewable energy technologies won’t save us from climate change. We need new ideas.

By Ross Koningstein & David Fork in IEEE Spectrum

5. We must understand and counter the major trends fueling the ranks of Islamic radicals.

By Maha Yahya in the National Interest

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME cities

Detroit Pedestrian Bridge Collapses Across Major Highway

The Cathedral Road pedestrian bridge lies collapsed on the south M-39 highway after a truck hit it on Sept. 26, 2014, in Detroit.
The Cathedral Road pedestrian bridge lies collapsed on the south M-39 highway after a truck hit it on Sept. 26, 2014, in Detroit. Robert Allen—AP

Lions quarterback Matt Stafford was on the scene, mingling with others

Updated at 10:30 a.m.

A pedestrian bridge spanning a major freeway in Detroit collapsed Friday morning after it was struck by the bucket of a truck, killing the driver and causing a substantial traffic buildup.

The collapsed bridge on Joy Road spanning the Southfield freeway blocked traffic in both directions. No further injuries have been reported stemming from the incident.

Detroit Lions Quarterback Matthew Stafford was among the last drivers to pass under the bridge before it crashed to the ground. He was seen mingling with other onlookers amid the wreckage.

A spokeswoman for the Michigan Department of Transportation, Diane Cross, told CBS Local news “it’s an older bridge” but The Detroit Free Press reports the bridge passed inspection just last May.

[CBS Local]

TIME Obama

Obama Threatens to Go It Alone if Congress Doesn’t Help Fix Highways

Obama-Infrastructure
U.S. President Barack Obama speaks on the economy in Georgetown Waterfront Park on July 1, 2014 in Washington. Mandel Ngan—AFP/Getty Images

Obama threatens to continue acting without Congress if they don't fix the Highway Trust

President Barack Obama’s speech Tuesday was intended to call Congress to action on replenishing a fund for state and federal highway projects. Instead, it turned into a political rant against House Republicans, with Obama saying he’ll proceed without Congress’ help if need be.

The Highway Trust Fund is due to run out in 58 days, according to the American Society of Civil Engineers, putting 877,000 jobs and $28 billion in U.S. exports at risk. The fund is rapidly depleting due to declining gas tax revenues, a problem Obama wants to fix by eliminating corporate tax breaks. House Republicans, however, have balked at his plan.

“House Republicans have refused to act on this idea,” said Obama. “I haven’t heard a good reason why they haven’t acted, it’s not like they’ve been busy with other stuff.

“No, seriously. They’re not doing anything. Why don’t they do this?,” Obama added, before arguing that the U.S. spends a smaller portion of its economy on infrastructure than “just about every other advanced country.”

House Republicans, meanwhile, want to keep the highway fund rolling by ending Saturday U.S. Postal Service deliveries or enacting more stringent state online sales taxes. But in Tuesday’s speech, Obama was clearly frustrated by Congress’ inaction and with the increasing partisanship of the issue — House Republicans last month said they plan to sue Obama for what they argue has been the President’s abuse of executive actions, which allow the executive branch to take certain actions without approval from the legislature.

“It’s not crazy; it’s not socialism. It’s not the imperial presidency. No laws are broken, it’s just building roads and bridges like we’ve been doing,” the President said, adding that if House Speaker Boehner (R-OH) and his party won’t cooperate, he will continue to act independently.

“Middle class families can’t wait for a Republican Congress to do stuff,” Obama said. “So sue me. As long as they’re doing nothing, I’m not going to apologize for trying to do something.”

MONEY The Economy

Fix Roads and Bridges — Just Don’t Hike Gas Taxes to Do it

Closed-up cracked asphalt after earthquake.
Yiannis Papadimitriou—Shutterstock

Raising the federal gasoline tax targets the groups that contribute most to wear and tear on America's crumbling roads. Yet there are less regressive ways to address the country's infrastructure needs.

Who should pay to repair and improve the nation’s transportation system?

Someone has to. About 10% of the nation’s approximately 600,000 bridges are structurally unsound. Another 14% are antiquated. Tunnels, highways and mass-transit systems also cry out for improvements.

Yet the federal Highway Trust Fund, which is supposed to pay for most of this, is shaky. It has needed infusions from general revenues a few times in the past six years, and will run out of money this year unless Congress gives it a new allocation.

So who will be stuck with the bill?

• Taxpayers at large? This would come through the federal income tax.
• Trucking companies that put extra wear and tear on roads? That might be done by raising tolls on federal highways.
• People who drive a lot? This would involve raising the gasoline tax, as proposed this week by a couple of Senators.

Sen. Bob Corker (R-Tenn.) and Sen. Chris Murphy (D-Conn.) want to raise the federal gasoline tax to 30.4 cents a gallon over two years, from 18.4 cents a gallon at present.

Perhaps mindful of the Tea Party’s growing power, the senators say their plan won’t necessarily raise the total tax burden on Americans. To offset the gas-tax increase, they say, Congress could extend certain tax breaks that have expired or are scheduled to expire.

As one example, they mentioned the deduction for teachers who spend money on classroom supplies. Another example was the federal deduction for taxes paid to states. These deductions may be good or bad, but none of them offer much comfort to people who use a lot of gasoline.

The federal gasoline tax is only part of the picture. When I fill the tank of my wife’s Subaru in the Boston suburbs, I pay about $55. The gasoline itself costs me roughly $48, Massachusetts takes $4 and Uncle Sam takes $3.

If I lived in California I would be paying about $11 in combined state and federal tax for the same tank of gas. It would be about $10 in Connecticut or Hawaii.

Taxes on specific goods and services, such as gasoline or cigarettes, have two main purposes — to raise revenue and to discourage the use of the item in question. Proponents of higher gas taxes often point to the health effects of air pollution and a desire to encourage mass transit.

As a clean-air proponent, I’m tempted to endorse a higher gasoline tax. But it’s a regressive tax, hitting hardest those people who – often by necessity, not choice – have to commute a long distance to work.

It is more logical to have funds for transportation infrastructure taken from general revenue. That way the benefits of each item — defense, Social Security, Medicare, bridge repair, highway construction, and so on — can be weighed each another, and we can decide how much of each we can afford.

John Dorfman is chairman of Thunderstorm Capital LLC, an investment management firm in Boston.

TIME White House

Obama Wants Less Red Tape for Infrastructure Projects

President Barack Obama is expected to use a speech at New York’s Tappan Zee Bridge on Wednesday to unveil proposals that would accelerate the often painfully slow federal reviews of new major projects and also call on Congress to pass a new transportation-spending bill

President Barack Obama will use a speech at New York’s Tappan Zee Bridge on Wednesday to highlight his Administration’s efforts to cut red tape in an effort to speed up federal infrastructure projects, while calling on Congress to act swiftly to pass a new transportation-spending bill.

According to a White House official, Obama will announce proposals to streamline the sometimes jumbled review process for major infrastructure development. Under the Administration plan, federal agency reviews of new projects would be conducted simultaneously as opposed to sequentially, saving much time, while a lead agency would be selected for each project to manage the overall review process.

“The new, government-wide plan will build on efforts the Administration has taken over the past three years to cut through red tape and expedite permitting decisions, while protecting our communities and the environment,” the official said. Obama’s focus on streamlining bureaucracy comes after repeated delays of his Administration’s review of the controversial Keystone XL pipeline, with a decision now unlikely before November’s midterm elections.

Obama will also highlight the need for Congress to pass a new transportation bill this summer, or jeopardize “112,000 ongoing highway and 5,600 transit projects, as well as nearly 700,000 jobs.”

A bill to fund federal transportation projects is working its way through the Senate, though Transportation Secretary Anthony Foxx told reporters Monday that it does not provide enough funding. Obama has proposed a $302 billion funding bill. According to the White House official, Obama will blast House Republicans for cuts to transportation spending in their own proposals, which include an 83% cut to a grant program created by the 2009 stimulus bill, and limits on new bus-and-rail funding.

TIME Chile

Wildfires Rage in Chile

At least 16 people are dead from wildfires burning around the coastal town of Valparaiso, Chile.

Strong winds have fanned the flames, making it difficult for firefighters to stop the blaze from spreading to over 2,000 acres of steep terrain. Homes are mostly wood, often built on hillsides with narrow access roads and no fire hydrants.

The fires have so far destroyed roughly 2,000 homes, and displaced at least 10,000 people. Until the burning is controlled, local officials expect those numbers will continue to rise.

To curb looting, the Chilean government has called in police from all over the country. Officials are also drawing up a plan to evacuate a nearby prison that is in danger of being swallowed by the flames.

TIME Government

Wrecking Balls Needed! Cities Can’t Tear Down Blighted Homes Fast Enough

Detroit Struggles To Re-Build A Bankrupt City Amidst Poverty And Blight
Lawrence Payne walks past two abandoned houses on September 4, 2013 in the Six Mile Gratiot neighborhood of Detroit, Michigan. Andrew Burton—Getty Images

Around the country, insufficient funding and epic amounts of red tape are among the hurdles holding American cities back in the quest to demolish tens of thousands of vacant buildings.

Over the weekend, a Philadelphia Inquirer story explored a tough situation in Philly: Authorities have labeled nearly 600 homes as “imminently dangerous” and in need of being torn down, and yet the city does not have enough money in the budget to handle the job. Normally, the cost of razing a dangerous building is the responsibility of the property owner, but in many cases these dilapidated, usually vacant homes have no owners.

By comparison to Detroit, however, Philadelphia’s problems seem minor. The Detroit Free Press recently rehashed some of the monumental challenges facing the city, which has established a goal of tearing down some 80,000 blighted homes over the course of six years. Among the hurdles that must be surmounted to reach the goal is the presence of squatters in a sizable percentage of these homes, as well as the difficulty of finding and transporting the staggering amount of dirt that will be necessary to fill the holes left once the homes and their basements are removed.

Then there’s arguably the most difficult, aggravating challenge of all: paperwork. “Titles must be cleared, utilities shut off, notifications sent, asbestos removed,” the Free Press explained. “Often it can take months to certify that a structure is ready for demolition before the city can issue a permit to a demolition contractor.”

The headaches being encountered by Detroit’s enormous initiative will only seem to grow as the city picks up the pace of demolition. Crews are currently working at a rate of roughly 100 tear-downs per week. By next year, the plan calls for 400 to 500 homes in the city to be razed and removed each and every week.

(MORE: Guess Where the Middle Class Can’t Afford to Live Now? Yep, Detroit)

A New York Times story published last fall explored the idea that cities such as Baltimore, Buffalo, Cleveland, and St. Louis are deciding in favor of demolition not simply because buildings are dangerous and uninhabitable, but sometimes because after seeing the local population decrease year after year, the buildings now have little use. Here’s how one expert quoted by the Times explained the transformation in urban planners’ decision making:

“In the past, cities would look at buildings individually, determine there was a problem, tear them down and then quickly find another use for the land,” said Justin B. Hollander, an urban planning professor at Tufts University. “Now they’re looking at the whole DNA of the city and saying, ‘There are just too many structures for the population we have.’”

The Times reported that Cleveland had spent $50 million over the previous six years on the demolition of houses. Yet it seems as if the work has barely begun. A Cleveland Plain Dealer editorial recently referenced an estimate indicating that 12,000 to 15,000 “eyesores (and potential crime scenes)” in the area should be razed. Because studies have shown that “strategic demolition of blighted structures stabilized and increased real estate values, decreased foreclosure rates and lessened tax delinquencies,” the editorial calls for tens of millions of more dollars to be used to knock down homes as soon as possible.

TIME Infrastructure

Rep. Charles Rangel: For Too Long, Congress Has Ignored Infrastructure

U.S. Rep. Charles Rangel (D-NY), speaks to the media near the smoking site of an explosion in East Harlem on March 13, 2014 in New York City.
U.S. Rep. Charles Rangel (D-NY), speaks to the media near the smoking site of an explosion in East Harlem on March 13, 2014 in New York City. John Moore—Getty Images

In the wake of the explosion and building collapse in East Harlem that killed at least eight people, apparently caused by a gas leak, Rep. Charles Rangel says the country's infrastructure must be shored up to meet the demands of the 21st century

When I first described as “our community’s 9/11” what we now know was a gas explosion, I was referring to the chaos and shock that resulted from the tragic incident that occurred in the heart of my beloved congressional district in East Harlem on Wednesday morning. While it was neither a terrorist attack nor comparable to 9/11 in scope and scale, the suffering from loss or injuries of loved ones has been as painful and horrific to the entire community where I was born and lived all my life. Still, I could not be more proud of the first responders and the Red Cross, as well as Governor Andrew Cuomo and Mayor Bill de Blasio, who have provided immediate assistance to my constituents for which I am grateful.

We have to wait for the findings from the National Transportation Safety Board team’s investigation, but it is apparent that the catastrophic gas explosion has been caused by poor and outdated infrastructure. According to the Center for an Urban Future’s recently released report, New York City’s gas mains are on average 56 years old, with most of them made of materials that are highly leak-prone. Altogether, the City needs almost $47 billion worth of infrastructure upgrades by 2020. It is costly, but we will pay a higher and terrible price if we ignore it.

In fact, our nation’s overall infrastructure is in dire condition. The American Society of Civil Engineers, in its 2013 Report Card for America’s Infrastructure, gave a near-failing grade of D+ based on physical condition and needed investments for improvement. For too long, Congress has ignored the urgent need to provide funding that directly impacts the health, safety, and welfare of the public. Before any other community across the country suffers great destruction, we must commit to shoring up our 20th century infrastructure that simply cannot keep up with the demands of the 21st century.

This is why we should support President Barack Obama’s fiscal year 2015 budget request, which lays out a long-term plan that expands economic growth, makes critical investments in our future, and reduces the deficit. The President’s 10-year request includes proposals aimed at enhancing the role of private capital in U.S. infrastructure investment as a vital additive to the traditional roles of federal, state, and local governments. It also calls for the creation of an independent government entity, such as the National Infrastructure Bank or similar financing vehicle, in addition to the enactment of the America Fast Forward Bonds program and other tax incentives to attract new sources of capital that can help buttress our nation’s infrastructure.

Today, New Orleans stands strong with upgraded levees. These are nothing like the flawed structures that failed in 2005 during Hurricane Katrina, killing more than 1,800 people and causing nearly $125 billion in damage. The new system will greatly reduce flooding, even in 500-year storms, because it was rebuilt with enhanced engineering and durable construction materials to provide state-of-the-art protection to the residents of the Gulf Coast who have courageously overcome the devastation and destruction caused by the deadly hurricane.

I am fortunate to represent a community where people have offered their homes, hands, and prayers to help their neighbors in any way that they can. Our community is resilient and will recover from the tragedy stronger and as united as ever, just as our country did after 9/11. Congress must subsequently fulfill its obligation to the American taxpayers to ensure public safety. While we cannot stop Mother Nature from wreaking havoc in our communities, lawmakers must do what we can to invest in sustainable infrastructure that will insure against preventable harm.

Charles B. Rangel is a 22nd-term Congressman representing New York’s thirteenth congressional district, which includes Upper Manhattan and parts of the Bronx.

TIME Infrastructure

New York City Is Crumbling

Firefighters respond to an explosion that leveled two apartment buildings in the East Harlem neighborhood of New York, March 12, 2014.
Firefighters respond to an explosion that leveled two apartment buildings in the East Harlem neighborhood of New York, March 12, 2014. John Minchillo—AP

While tragedies are rare, the city's aging infrastructure is responsible for countless disruptions and malfunctions. Billions will need to be spent—but the price of inaction is worse.

It is still unclear what caused Wednesday’s tragic explosion in East Harlem. Firemen and forensic inspectors are still combing through the debris. But many signs point to a 127-year-old, cast-iron gas line that served the collapsed buildings.

Sadly, these old gas lines are not uncommon in New York City. The city’s 6,362 miles of gas mains are 56 years old on average and 53 percent are made of unprotected steel or cast iron, corrosive and leak-prone materials. In 2012, this aging network of gas mains and service lines was responsible for nearly 6,000 gas leaks across the city.

In the wake of Wednesday’s deadly blast, Mayor Bill de Blasio and other New York officials — including those from Con Edison, the utility company that provides natural gas to Manhattan, the Bronx and sections of Queens — will need to expedite the repair and replacement of the aging gas distribution system and prevent similar disasters in the future. Their work cannot end with the gas lines, however. Throughout the city, utility and transportation infrastructure is decaying and in need of immediate attention.

A report published on Monday by the Center for an Urban Future found a significant portion of New York City’s bridges, water mains, sewer pipes, school buildings, and other essential infrastructure is more than 50 years old and in need of repair. Throughout the city, 1,000 miles of water mains, 170 school buildings and 165 bridges were constructed over a century ago. The city’s public hospital buildings are 57 years old, on average, and 531 public housing towers were built prior to 1950.

While tragedies are rare, this aging infrastructure is responsible for countless disruptions and malfunctions.

In 2013, there were 403 water main breaks. Although most are minor, serious ruptures are an annual occurrence. Already this year, a major water main break on 13th Street in Manhattan flooded the street and nearby subways. In 2013, a similar incident paralyzed the subways at 23rd Street in south Midtown.

In 2012, 162 bridges across the city — or 11 percent of the total — were structurally deficient. More problematic, 47 of these were deemed “fracture critical,” an engineering term for bridges that have little structural redundancy, making them prone to failure and collapse.

Thirty seven percent of all subway signals exceed their 50-year useful life, slowing the movement of trains and forcing maintenance workers to build their own replacement parts because they are no longer privately manufactured. Approximately 4,000 miles of sewer pipe across the city are made of vitreous clay, a material susceptible to cracking and blockage. Meanwhile, 1,500 of the 2,600 public housing buildings do not comply with local standards for exterior and façade conditions.

Restoring and modernizing these deteriorating assets will not be easy, or cheap. We estimate that $47 billion is needed over the next four to five years simply to bring the city’s aging infrastructure to a state of good repair. However, based on accumulated funding gaps and shortfalls in upcoming capital plans, unmet needs will reach $34.2 billion.

To address this funding gap, the city will need additional assistance from the federal government, which has a huge stake in the economic competitiveness of New York and other urban centers. Congress should support President Obama’s recent proposal to devote $300 billion to preserving and modernizing the nation’s crumbling infrastructure.

State and local officials must also take immediate action to raise revenues for infrastructure projects and reduce building costs, so that limited resources go farther. For instance, Mayor de Blasio and Governor Cuomo should identify new dedicated revenue streams to pay for infrastructure projects. This might include tolls on the East River bridges, a stormwater management fee, pay-as-you-throw trash collection and parking permits. New York City can also streamline its procurement laws and procedures, and improve its asset management practices by rigorously inspecting and inventorying existing assets, developing an explicit rubric for allocating capital dollars and aligning infrastructure planning with demographic shifts and economic development.

Mayor de Blasio should also focus a larger share of the capital spending on repairing and modernizing existing infrastructure assets. While former mayor Michael Bloomberg deserves significant credit for constructing several new schools and parks and completing major projects like the third water tunnel, his administration’s generous capital budgets often placed more emphasis on new construction than on needed repairs. Conditions of local roads declined over the course of his administration, as did the replacement rate of water and sewer mains.

As the recent tragedy in Harlem illustrates, the consequences of failing to maintain and repair existing infrastructure can be dramatic. Without immediate, sustained and generous investment in its core infrastructure, New York’s health, safety and quality of life will quickly diminish.

Adam Forman is research associate at the Center for an Urban Future, a New York City based think tank. He is also author of “Caution Ahead,” a report published on Tuesday by the Center about New York’s infrastructure vulnerabilities.

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