Antony Davies and James R. Harrigan: Rob Peter to pay Paul
Potholes are an annual concern in the region, and Gov. Tom Wolf pledged this month to do something about them. The governor has put together more than $180 million toward the project, including $60 million from PennDOT cost-saving efforts and $30 million from the federal government.
But Pennsylvania has the highest gasoline taxes in the country, and Pennsylvanians consume around 5 billion gallons of gasoline annually.
Why did the governor have to go looking for $180 million to fix potholes?
Our exorbitant gas taxes should have generated plenty of money. Last year’s 8-cent tax increase generates $400 million annually. That doesn’t include the other 50-cents-per-gallon tax that generates another $2.5 billion annually. And that doesn’t count the more than $1 billion the Pennsylvania turnpike collects in tolls each year.
Nor does it count the approximately $75 million the state police collect each year for traffic tickets. Why do traffic tickets matter? Because Harrisburg routinely raids gasoline tax revenues to pay for the state police. Last year, the governor took $700 million from PennDOT’s Motor License Fund to help pay for the police and public schools.
This fungibility problem — the ability of government to use money intended for one thing to pay for another — arises when we socialize goods and services. We socialized roads when we decided that government, rather than private companies, should provide them. There are many good reasons for this, but the fungibility problem remains. When the government taxes us to pay for roads, politicians can divert tax revenue intended for roads to other things they’d rather spend money on instead.
Presidents Roosevelt and Johnson socialized retirees’ pensions and health insurance. Later politicians raided trillions from those trust funds to pay for all sorts of other things. Sen. Bernie Sanders, I-Vt., pushes to socialize health insurance for everyone. Our public schools are fully socialized. Our colleges and universities are partially socialized.
Contrary to what some politicians would have us believe, socializing something doesn’t make it free. It actually makes it more expensive since we must pay both for the thing and for the bureaucracy to administer the thing. And since people pay for socialized things in taxes instead of at the point of sale, socializing things makes it easy to hide what those things actually cost.
Given the economic and political costs of socialization, we should only socialize those things that are impractical to pay for on a per-use basis. It’s not practical to set up toll booths at every intersection to charge people for roads, or to insert coins into street lights when it gets dark. But when we do socialize a thing, we should ensure that the taxes collected to fund the thing actually go toward it.
Raiding one tax source to pay for something else yields a vicious cycle. Politicians use crumbling roads as a justification to raise gas taxes. They use underfunded state worker pensions as a justification to raid the gas tax revenues, leaving potholes unfilled. Then potholes become an excuse to raise gas taxes further.
It’s great that Wolf has come up with $180 million to fix our potholes. But it would have been better if he had fixed our potholes with the money we paid for that purpose in the first place.
Antony Davies is associate professor of economics at Duquesne University. James R. Harrigan is CEO of FreedomTrust. They host the weekly podcast Words & Numbers.