Saturday, March 29, 2008


Gas Tax and Road Construction

In several previous posts I have noted the Catch-22 relationship between vehicle fuel taxes and road maintenance/construction. If fuel taxes are lowered to mitigate the high cost of fuel for drivers, road maintenance and construction will have to be curtailed. A case in point is now unfolding in Japan with the expiration of a gasoline tax today, March 31. Already the Ministry of Land, Infrastructure and Transport has announced that while continuing funding for road maintenance and certain ongoing projects such as tunnel construction, which are spread out over multiple years, it is curtailing new construction projects. Local governments say that unless their share of the gasoline tax revenues is restored soon, road maintenance and construction projects will be frozen or canceled.

As drivers rejoice that gasoline will be cheaper, the roads they drive on are put in jeopardy at the same time.

So now we have a test case in a developed country, and we should watch it closely. One side in the debate claims that fuel must be cheaper to keep the economy healthy, and the other side claims that the tax is needed to maintain roads. They’re both right. Who will prevail, and how soon?

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