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February 7th, 2011
Gridlock Sam: Freedom Fees

Samuel I. Schwartz, P.E.

How can we at once reduce our dependency on foreign oil, improve our environment, reduce the need to be at war in the Middle East, improve relations with the rest of the world and demonstrate our patriotism? The answer is simple: Freedom Fees.

Freedom Fees are what I propose we call those things that raise revenue for our world class (but poorly maintained) transportation system in the United States, including gas taxes, road tolls, emissions, vehicle miles traveled (VMT) charges and all the other methods we employ or may employ to pay for our country’s roads, bridges, tunnels, highways, transit and aviation infrastructure. It must also be a “lock-box” system which guarantees the fees would be used for transportation only and there be no concomitant reduction in existing government contributions to transportation. The fees must be free from the grips of the bean counters, who would play three-card Monte with the funds and treat it just like a tax!

This isn’t simply semantics. This is about taking a politically toxic concept like a gas tax hike and fundamentally changing the way we think about it. A gas tax has the negative connotation of a burden, whereas a Freedom Fee reflects the true reward for the price we pay. Freedom from foreign oil. Freedom from air pollution. Freedom from increased carbon footprints and global warming. Freedom from crumbling highways and bridges. Freedom from traffic jams.

The phrase Freedom Fees may sound a lot like Freedom fries, and that’s the point. Remember Freedom fries? That’s what Americans started calling French fries as a symbol of their anti-French sentiment when France frowned on the 2003 U.S. invasion of Iraq. Others led campaigns to boycott French goods. It was considered patriotic to stop selling French wines and change your restaurant menu to include Freedom fries. Even Congress changed the cafeteria menu to include the renamed fries. It was all a relatively symbolic sacrifice compared to the gas rationing during World War II, but the idea is the same: we all need to sacrifice for a better future for our country.

What we need today is that same political and patriotic will to do what a number of congressionally mandated bipartisan panels have concluded: raise the gas tax now and develop a long-term financing plan for the future. Supporting a higher gas tax, or imposing Freedom Fees, I would argue, is as patriotic as eating Freedom fries or gas rationing. An increase in the gas tax would not only generate the financial resources we need to keep our transportation infrastructure globally competitive, but would also encourage us all to consume less fuel, making us less dependent on the oil-rich Middle East countries that threaten our interests, as well as petroleum-rich dictators like Hugo Chavez in Venezuela. Freedom Fees could pay for the development of alternative energy technology, also further weaning us off our oil dependency. In the words of George W. Bush in his 2006 State of the Union address, “America is addicted to oil.” It’s about time we kicked the habit.

The refusal by Congress to raise the federal gas tax, which has been 18.4 cents per gallon since 1993 (the last two increases were under President Bill Clinton in 1993, by 4.3 cents per gallon; and by President George H. W. Bush in 1990, raising it 5 cents per gallon) despite proposals from both political parties to do so. The National Surface Transportation Infrastructure Financing Commission has recommended a gas tax increase of 10 cents per gallon and 15 cents per gallon for diesel, both indexed to inflation. Late last year, President Barack Obama’s bipartisan National Debt Commission also recommended a gradual 15-cents-per-gallon increase in the federal gas tax. Also, Sens. Tom Carper (D-Del.) and George Voinovich (R-Ohio) last year proposed a 25-cent per gallon tax increase – one cent per month for 25 months – suggesting that 10 cents of the tax hike should go toward debt reduction and the rest should fund transportation infrastructure. There has also been a call in the states to raise state gas taxes. In New Jersey, the Sierra Club, New Jersey Future, and other groups have urged Gov. Chris Christie to raise the gas tax. In Arkansas, a blue ribbon commission on highway finance recommended indexing gas and diesel taxes.

During the last fuel crises in 1979 President Jimmy Carter recommended a 50-cents-per-gallon gas tax to get us weaned off foreign oil and get more efficient in transportation. The nation didn’t take his advice. Imagine if we did.

We need to catch up to developed nations around the world. Currently in the UK, the petrol tax is about $3.50 USD per gallon, not including a 20% VAT on top of that. With today’s price of fuel, these taxes make up about 175% of the cost of fuel. Not only does the UK peg fuel taxes to inflation, they have, since 1993 enacted a Fuel Price Escalator, where the price of fuel rises ahead of inflation. There are also tax reductions for trains, buses (local and long distance) and for some construction and farm vehicles. The average tax on gas in Canada is about $1.20 (USD) per gallon, which makes up almost 1/3 of the cost of gas. We shouldn’t be afraid to increase our own much lower gas tax.

Freedom Fees could include much more than gas consumption fees. They can include a package of tools used to generate funding for transportation infrastructure and to reduce fuel consumption. A vehicle-miles-traveled (VMT) charge could be one type of Freedom Fee. This much-debated tax method would harness the power of modern technology by using onboard tracking devices such as a Global Positioning System (GPS) to count the miles a car is driven. Other Freedom Fees could be in the form of gas emissions charges, expanded road tolling or congestion pricing. There is also pay-as-you-drive insurance, an idea proposed recently in New York that would charge drivers insurance based on the number of miles they drive. A Brookings Institution report found that if drivers paid for insurance by the mile, total driving would drop by eight percent.

It is a critical time for the nation’s transportation infrastructure. With a change in balance of power in the newly elected Republican Congress, transportation experts are predicting a slashing of the federal transportation program. High-speed rail projects, livability programs, uncommitted stimulus funds and executive earmarks could be on the chopping block. The proposed National Infrastructure Bank won’t likely be getting approval by this new Congress.

Freedom Fees are something the new Congress can embrace. It’s a fiscally sound, politically palatable, patriotic idea that many Republicans and Democrats can support. Freedom fees are as American as baseball and apple pie.

Ana Maria Lima and Morgan Whitcomb contributed to this article.

Samuel I. Schwartz is a former New York City Traffic Commissioner who currently writes the Gridlock Sam column for the New York Daily News and is CEO of Sam Schwartz Engineering.

  • Dave

    One small problem. Transportation has no consistent supporters in politics.

    The right hates transportation because it is wasteful government, just another boondoggle like the “bridge to nowhere”. They will fight to insure revenue continues to go down.

    The left hates transportation because they see any construction project, even maintenance, as destroying the environment. They will fight to insure that, as taxes go up, funds are increasingly diverted to their real priority, welfare.

    No one will support transportation revenue being spent on transportation because neither major party really support repairing, let alone expanding, our infrastructure.

  • Michael S. Ellegood, PE

    There is even a more fundamental issue than funding, it is that our DOTs and agencies responsible for public infrastructure have a documented history of not being able to deliver what they set out to deliver on budget and schedule. AASHTO published a study in 2007 (NCHRP Project 20-24) that looked at the project delivery track record of over 26,000 projects in 20 states over a five year period. They found that for projects with a construction cost over $5 mil, 30% exceeded their initial contract amounts by over 10%. Only 35% of these projects were delivered on time. This tracks with my personal experience as a Public Works and Transportation Director of a major urban county. In my opinion, we should not be asking for more money if this is our documented track record.
    What we need are several things: (1) an understanding and awareness of this issue by senior transportation managers; (2) Empowered public sector project managers; (3) An array of simple but effective project management tools for the public sector; (4) An accounting system that is useful for project managers not just for the accountants; (5) A culture of project management in our transportation agencies.
    Business could not long survive with a project delivery track record as abysmal as ours in the public sector, we can and must do better. When this is accomplished, we can, with impunity, ask our citizens for more money.

  • Frank McArdle

    Whatever you want to call them, we need a user fee system to pay for the capital and operating costs of our utility systems. And the analyses of the National Study Commission on Surface Transportation Policy and Revenue, of which I was a member, suggests that we need to be spending at a rate that is at least three times that which we now invest as a nation. The current annual level of $ 80 billions should be at least $ 240 billions if we are to build out all of the investments that have a positive return on investment.

    Raising such sums in this climate clearly scares the current Congress. The House leadership seems to be committed only to a program that can be supported by the existing revenue flows. That suggests that we will have only a $ 240 billion six year program, which will buy only 70% of what the last program got us,which was inadequate to keep up.

    It’s time to take the entire program into the utility model and treat it as we treat,or should treat, the national grid,as the key underpinning of our national economic success.

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