Eliminate federal gas-tax

Presidential candidates John McCain (R) and Hillary Clinton (D) are proposing a federal gas-tax holiday to alleviate the pain Americans are feeling at the pump. Barack Obama (D), however, is correctly rejecting this unsound voter pandering but is instead unwisely proposing a "windfall profits" tax on companies that invest in oil production.

The Tax Foundation has a good write up on the folly of these proposals here.

As for the current debate on temporarily suspending the federal gas-tax, a better course of action would be to eliminate the federal gas-tax and return that taxing authority to the states to use. Rather than send our gas-tax dollars to Washington D.C. only to have to beg to maybe have them returned back to the state with numerous strings attached, we could keep all those gas-tax dollars here and use them on our priorities instead of having them earmarked for a bridge to nowhere or for an interchange no one asked for.

There is already a proposal in Congress to do this.

Called the STATE Act (Surface Transportation and Taxation Equity Act), H.R. 3497 would amend the Internal Revenue Code of 1986 to reduce the federal tax on fuels by the amount of any increase in the rate of tax on such fuel by a state, returning primary transportation program responsibility and taxing authority to the states.

This means that if we increased our state gas tax by say 15 cents, the federal gas-tax we pay would be reduced by 15 cents so the overall tax burden would not increase but those gas-tax dollars would stay in the state for our transportation priorities – no federal strings attached.

The goals of the STATE Act are:

• Free state transportation dollars from federal micromanagement, earmarking, and budgetary pressures;

• enable decisions regarding which infrastructure projects will be built, how they will be financed, and how they will be regulated to be made by persons best able to make those decisions;

• eliminate the current system in which a federal gasoline tax is sent to Washington and through a cumbersome Department of Transportation bureaucracy;

• prohibit the federal government from forcing unwanted mandates on states by threatening to withhold transportation money; and

• achieve measurable congestion mitigation and infrastructure preservation and safety in a cost effective way subject to available resources.

It would be interesting to see what the presidential candidates think of the STATE Act and whether or not they support the goal of returning transportation taxing and decision making authority to the states.