The Obama-Haley-Harrell approach to road funding

07/09/2014 11:24 AM

07/09/2014 11:25 AM

Somehow I hadn’t managed to pay any attention to President Obama’s $302 billion plan to shore up the federal Highway Trust Fund until I read Cynthia Roldan’s article in The Post and Courier about all the angst S.C. officials have over the pending bankruptcy of said fund.

The president, she reports, wants to pay for roads “with savings from proposed changes to corporate tax laws.” That’s what some would call closing corporate loopholes, others would call raising taxes.

Whatever you call it, Ms. Roldan correctly notes that our highway system traditionally “has been funded primarily through federal gas and diesel taxes under the principle that users of the system should pay for its construction and maintenance.”

Which is to say that President Obama wants to radically change the way we fund highways.

If you think there’s something familiar sounding about the idea of abandoning the user-fee approach in favor of funding our highways with money that ought to be paying for general governmental services, if it’s collected at all, you’re right.

That’s precisely what South Carolina’s Republican Legislature decided to do last year, when it diverted some sales tax revenue to highway construction and maintenance. It’s what Speaker Bobby Harrell and the rest of the House tried to get the Senate to do even more of this year, with their bill to divert even more sales tax revenue. And it’s what Gov. Nikki Haley was proposing when she suggested using funds from the “money tree” to pay for road construction and maintenance. No word yet on her secret plan to pay for roads, but since she’s against raising the gas tax, or any other tax, it’s a safe bet that it also will involve raiding general revenues.

As I explained last year, after the Legislature made its first sales tax diversion:

The legislation would make only $41 million available annually. That’s compared to the $500 million to $1.5 billion we need annually.

In other words, it’s an itty-bitty, teeny-tiny drop in the bucket. And in order to get that drop, lawmakers agreed to permanently divert sales tax revenue from the general fund, for the first time ever abandoning the proposition that roads should be funded through gasoline taxes and license fees and other payments that are directly related to the use of roads.

Until now, we’ve reserved general tax revenue for more general needs, and indeed, the sales tax was instituted, and on several occasions raised, specifically to pay for public schools. No more.

The diversion is small, but once we’ve broken the barrier and started using general fund revenue to pay for roads, the only questions are how soon and how rapidly it will grow. The backlog is so formidable that it’s not inconceivable that road spending could crowd out public education, which already is being crowded out by medical care, at the top of our general expenditures.

All of which to say is that such diversions are just as bad an idea coming from our Republicans in Columbia as they are coming from the Big D in Washington.

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