Larry Summers: A Gas Tax to Fix America’s Roads is a ‘Free Lunch’

Lawrence Summers argues that “maintaining our infrastructure directly benefits American families and businesses because with fewer potholes they have to spend less maintaining their vehicles. This effect turns out to be surprisingly large. TRIP, a transportation research group, estimates that the cost to motorists of driving on roads in need of repair in 2013 was $109 billion. This includes only extra vehicle repair and operating costs, and not the delays caused by driving on poor roads, so it is almost certainly an underestimate. On the other hand, even with proper polices, some potholes would remain. To be very conservative, assume that proper infrastructure investment policies would save motorists half the total, or $54 billion a year.”

This figure “is comparable to total consumer spending of $49 billion on air transportation or $53 billion on personal computers. As another way of seeing its magnitude, it works out to 40 cents per gallon of gasoline consumed in the United States.”

“So if we were able to raise the gas tax by 40 cents and repair our highways and roads, we would create no new net burden on consumers: The benefit in reduced vehicle operating costs would at the very least offset their higher gas bills. In fact, since our cost estimate is conservative, the net effect on consumers would most likely be positive. And as is fair, those who drive the most would both pay the most and benefit the most from reduced repair costs.”

2 Comments

  1. Neither party would want to propose it without support from the other. It’s certainly a worthy suggestion, but it’s hardly the only way we could fund infrastructure improvements. We need to make many other changes to the tax code as well.

  2. The tax should be a variable one, designed to stabilize the price of gas at the pump at $3.00. The volatility in gas prices seen recently suggests gouging and price manipulation, and lower prices will encourage Americans to buy inefficient cars.

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