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The struggle of rebuilding America’s infrastructure

In his first address to Congress this Tuesday, President Donald Trump is likely to talk about his vision for rebuilding America's infrastructure with a $1 trillion plan. The nation's top funding source for transportation projects is the federal gas tax, which has been stuck at 18 cents per gallon since the early 1990s. Financial Times editor Ed Crooks joins Hari Sreenivasan to discuss.

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    In his first address to Congress this Tuesday, President Trump is likely to talk about his vision for rebuilding America's infrastructure. He's previously touted a trillion dollar price plan without detailing how he might pay for it.

  • One hurdle:

    the federal gas tax, the nation's number one funding source for transportation projects, has been stuck at 18 cents a gallon since the early 1990s. With average gas prices remaining low at $2.28 a gallon, many governors, from New Jersey to Tennessee to Montana, are raising or considering raising state gas taxes to jumpstart road, bridge, and tunnel repairs.

    "Financial Times" editor Ed Crooks joins me now to discuss this.

    These states, some of the states, you know, Tennessee, Oklahoma, Alaska, these went Trump fairly significantly and they're considering an increase in taxes which is usually not very favorable to Republicans. ED CROOKS, "FINANCIAL TIMES" EDITOR: Exactly, and as you say New Jersey went and increased their gas tax last year. Yes, it does seem people think there is a real problem that American infrastructure is crumbling, people are really worried about the states of roads and bridges in particular, and they need to do something. I guess you've got to make the case that if you've got to tax something, it's better to tax fuels rather than wages, or profits, or other things that people like and that want to happen.

    You know, one of the things about taxation, people will say, if you tax something, you got less of it. And it's probably better to tax fuel consumption and get people to use less fuel, rather than tax wages and have people get less wages or profits. And people make fair profits.


    You know, we had a story on this program a few years ago about sort of the irony in that when you kind of increase the price of gas, people start to think about more fuel efficient vehicles, maybe more hybrid vehicles, and ironically, if they purchase those, they actually buy less gas.


    Yes, that's absolutely true. But, of course, then — and don't forget the other thing that we got at the moment, is that oil prices are relatively low. Back three years ago, oil prices were $100 per barrel, and now, they are down in the kind of $50, $55 kind of area. And so, that means gasoline prices are a lot lower. It wasn't kind of $4 now, as you say, $2 and a bit.

    So, there is that opportunity there to probably make a bit of that gap in high taxes. And, of course, one of the things lower gas price he have been doing is they have been encouraging people to buy bigger vehicles, less fuel efficient vehicles and so on. So, people have been kind of heading on a path towards high consumption. So, if you just put the tax up a little bit, it might not, as you say, have the effect so much to deterring people from driving.


    Well, there's also the concern that it's one of those regressive taxes. If you don't have any other means to get to work than a vehicle, or if you're poor, you are likely to spend a greater portion of your income when you see something that's kind of a fixed cost go up.


    Yes, that is absolutely right, and that's probably the biggest and number one problem with raising the gas tax is the distributional impact. Probably doesn't hit people right at the bottom, because they tend not to own cars at all. And so, not so much of an issue for them, but certainly kind of people of lower to middle incomes, it's a real issue for them. They pay more of their income in gasoline than other people do, than richer people do, and so, they would be, as you say, hit the hardest by an increase in gas tax, and that's a problem which is quite hard to offset, you know, there is no probably obvious way to make it up to those people.

    And, of course, the other big issue is then between people who live in towns and people who live in the countryside. So, of course, you live in a town, you might have a mass transit option, there's trains, there's buses, other things you can do. If you live out in the countryside with nothing else really you can do, you have to have your car. It's an essential for you if you want to get to work, to get to the shops or whatever. And so, that again is potentially a big issue for raising the gas tax.


    All right. "Financial Times" editor Ed Crooks — thanks for joining us.

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