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Gas taxes, user fees and the roads

A tax is a coerced levy by a level of government to pay for so-called public services.  Our theory of the public finance is that we pay taxes to local and state governments for schools, welfare benefits, police protection, courts, prisons, and all sorts of services to create a humane, compassionate and safe society as well as produce an educated citizenry. (The federal government is omitted from this discussion.)   In addition, we are taxed at the gas pump so state and local governments can provide an infrastructure—roads, highways and bridges–to help commerce flourish by providing safe and smooth driving conditions for the people of New Jersey.  That’s the theory.  The reality in New Jersey is at odds with the fundamental theory of public finance.No one needs to be reminded that New Jersey’s roads and bridges are in horrible shape.  In some cities and towns, the roads resemble the streets and highways of Third World countries instead of the infrastructure of one of the wealthiest states in America.  And what was once smooth highways throughout New Jersey are now littered with potholes.  In addition, overpasses and bridges are deteriorating at an astonishing rate.  How can that be?

Simply put, past governors and legislatures have mismanaged the Transportation Trust Fund (TTF) so badly that it will not have sufficient revenue to pay for projects at the end of the 2011 fiscal year.  Instead of having a sound strategic plan that would provide a steady stream of revenue to pay for the maintenance of New Jersey’s crumbling infrastructure, governors and legislatures over the past two decades, in other words, both Democrats and Republicans, refused to increase the so-called gasoline tax lest they be accused by their opponents in a primary or general election of being a tax hiker.

In short, politics interfered with sound fiscal policies to maintain a high quality road and highway network in the state.

The gas tax is not a tax but a user fee.  It is paid by automobile and truck drivers to use the roads and highways.  The “gas tax” is like paying for a stamp.  If you use the post office, you will be charged for a first class stamp or any other service the post office offers.  We do not pay a postage tax to use the post office’s services.   We pay fees all the time for many services, e.g., cable TV, cell phone service, movies and plays, DVD rentals, etc.  In fact, fees are the free market approach to paying for services, even if the government is providing the service.

(Ideally, it would be preferable to get the government out of the business of providing services that could be handled by the private sector.  But that is a discussion for another day.)

The arithmetic of raising the “gas tax”—which should be renamed the Road User Fee (RUF)—is simple.  A 10 cent hike in the RUF for an average driver would cost him anywhere from $50 to $100 per year.  A driver who gets 30 miles per gallon and drives 15,000 miles per year would pay an additional $50 per year.  A higher income driver may own a vehicle that gets only 15 miles per gallon, a humongous SUV for example, and drives 15,000 miles per year would pay an extra $100 per year.

The RUF should be increased by at least 20 cents for trucks, because these behemoths of the highways have the greatest impacts on road surfaces and therefore they should pay more for the upkeep of the state’s infrastructure.

Anyone could figure out his additional cost so that we the people will know how much it would cost so we will be able to drive on roads that do no jar our teeth and/or damage our vehicles and ruin our tires.  This is a relatively small price to pay for good and people to move on our highways as comfortably as possible.

In the meantime, Governor Christie should take this opportunity to blame previous governor and legislatures for not fulfilling their obligations to the people of New Jersey.  He should say in no uncertain terms that we have to fix what is broken in New Jersey– financial mismanagement.  The governor should say that we need to be honest about the cost of government, that the state is responsible for assuring that the roads are in excellent condition, and that takes money from the users of the roads and highways.

Governor Christie has an historic opportunity to restructure state government and to create a climate for business to thrive.  He should create a steady stream of reliable funding for the TTF, lower red tape for businesses, reduce the income tax, and return spending decisions to local governments.  This is the strategic plan that would put New Jersey on the road to sustainable prosperity.

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