Friday, March 04, 2011

EDITORIAL >> Funding Highways

Let’s give House Speaker Robert S. Moore an A for courage but a D for content with his highway-funding program. It would rely mainly on an increase in the general sales tax to pay off highway-construction bonds, and that is precisely the wrong tax for that job. 

We are not enamored with the whole idea of a massive ($3 billion) highway program when there are greater needs, but there is a powerful constituency for highways and many who believe that a superhighway system is the key to economic growth. Moore, who is from poor southeast Arkansas, wants a four-lane highway connecting rural areas like his to the seats of commerce. We don’t believe that is the salvation for the dying Delta or other poor regions, but we cannot fault people like Moore for seizing on that remedy. 

Nor can we deny that something needs to be done to restore highway funding to a level that can at least maintain the roads and streets and replace crumbling bridges. Motor-fuel taxes, the chief source of highway funding, have been declining, owing to increasingly efficient cars and trucks, while petroleum prices have driven up the cost of road materials. 

A highway coalition has been searching for the right tax—one that might have a chance to pass in a virulent anti-tax atmosphere—and they didn’t find one. So Moore proposes to refer a package to voters—a bond issue and two taxes to support it, a half-cent increase in the general sales tax and a four-cent-a-gallon diesel tax. 

The diesel tax is the right way to go because it will be borne principally, though not altogether, by big trucks, which cause most of the highway damage on the Interstate and primary highways. In the hills north of here, of course, the gas-drilling operators are systematically beating the highways to pieces. 

The sales tax, however, has no place in paying for highways. It and the income tax have been the predominant source of money for education, medical services, law enforcement and corrections. It is a broad tax that hits everyone (except the industries and special interests that have gotten exemptions from the tax), and it pays for a range of services that help everybody. A highway incursion into that precious source of government funding will make it harder in the future to raise that tax when the general needs of society require it. 

Highways traditionally have relied on user fees—that is, those who use them, fund them. The state’s expensive game and fish programs were another, until Gov. Huckabee persuaded people in 1998 that they needed to raise the sales tax and dedicate it to hunting and fishing programs. To spend all that money, the Game and Fish Commission had to bulk up its staff and buy everyone a new car. The tax is in the Constitution, so nothing can be done about the waste such as redeploy it to the schools, highways or prisons. 

Yes, there are hundreds of thousands of people who use the roads only a little or not at all, but they would pay a big part of the highway development and maintenance when they bought groceries and clothing.  

A fairer highway tax would be to convert the current excise tax on gasoline, diesel and liquefied petroleum fuel to a sales tax, which would provide an elastic source of funding for the highways. The tax would be borne by highway users in direct proportion to the amount they used them. It doesn’t get any fairer than that. 

Everyone at the Capitol recognizes why you can’t do something like that. The trucking and shipping industries oppose any tax that would require them to pay much more for the roads they are pounding, and legislators have always done their bidding. They will, however, support a program, including a little diesel tax, if most of the cost is borne by the little people. 

There is an even fairer proposition than a tax on motor fuel or the general sales tax. Sheffield Nelson, the former Republican state chairman and candidate for governor, intends to put an initiated act on the ballot to collect a severance tax of 7 percent of market value on Arkansas-produced natural gas. Pressed about it the other day, Speaker Moore acknowledged that it would be a fair way to raise highway money. How much the severance tax would produce cannot be known without a crystal ball that forecasts NYMEX gas prices into the future, but it would produce some $250 million a year at least, and much more if the demand for natural gas surges again. 

The legislature might consider the political prospects if it puts the highway sales tax on the ballot. Here is what the voters would consider in November 2012: Would they rather pay a hefty tax on nearly everything they buy to build superhighways far from their doors, or would they rather big out-of-state gas producers like Chesapeake and Southwest Energy pay for the roads from their enormous profits off a vanishing Arkansas resource? The severance tax could not be passed on to consumers—not Arkansas consumers anyway. The gas is commingled in interstate pipelines and marketed nationally. 

How do you think that choice would turn out? There would be a massive campaign by the gas interests, joined by the chamber of commerce, saying that taxing away some of the gas producers’ profits would “kill the goose that laid the golden egg,” to use the standard line. We may underestimate the Arkansas voter, but we don’t think it would work.