How to Accelerate the Texas Economy

Business, Economy, Politics


By Mustafa Tameez

Originally published on TribTalk, a publication by the Texas Tribune.

On Nov. 3, Texans will go to the polls to vote on whether the state should dedicate $2.5 billion in sales tax revenue to the state highway fund to help build and maintain roads.

Lawmakers say the plan, if approved, could mean an additional $3 billion in dedicated transportation funding by 2020. That’s great news, except that state transportation officials have said that simply maintaining current levels of congestion on our roads, highways and bridges would take $5 billion a year.

Further complicating matters are flagging oil prices and a wave of layoffs in the energy industry. Though we can once again fill up our cars for less than $70, it’s a cold comfort — especially in energy hubs like Houston — for our friends and neighbors who are losing their jobs.

We find ourselves in a strange triple bind: diminishing oil and gas jobs, lower oil prices, but a still-growing population that requires better infrastructure even as state funding remains limited. So what would a near-term approach to addressing this three-headed problem look like?

We need a mechanism for turning an oil price drop into an opportunity, and a revenue source for infrastructure that is distributed across all drivers in Texas. In other words, we need a marginal, temporary hike in our state gas tax.

Before you stop reading, hear me out.

Right now we’re paying about $2.60 for a gallon of gas. What if we added a nickel to the cost and then diverted that extra 5 cents per gallon into an infrastructure fund that the state could tap for the many projects that so desperately need funding? Lest you see this as just another big spending boondoggle, consider the details.

Raising the gas tax by 5 cents per gallon until oil prices begin to rise again would be just the kind of tax that conservatives claim they can stomach — one that is targeted and temporary. We could simply peg the tax to drop as prices at the pump rise. Capping the variable rate at 5 cents per gallon would also prevent the tax hike from significantly impacting Texans’ pocketbooks. After all, if you fill up a 20-gallon tank at $2.55 per gallon, you’re spending $51 — just a dollar more than if you filled up at $2.50 per gallon. Not to mention that we haven’t increased our gas tax in 24 years.

Given our booming population, this revenue could swell to a sizable infrastructure fund relatively quickly. A study conducted by the Federal Highway Administration in 2011 found our total consumption in 2009 at 15.8 billion gallons of fuel – 12 billion in gasoline, 3.8 billion in diesel. That means a 5-cent increase in the gas tax could generate $790 million in revenue — and that doesn’t even take into account the state’s population growth of the past several years.

Once we combine this new revenue with the proposed changes to the motor vehicle sales tax allocation, we would be able to fund our road and highway projects without tapping into any of the state’s other limited resources. There would be no need to dip into the Rainy Day Fund. And the biggest gains would go to the skilled and semi-skilled workforce that is always the first to be laid off during an oil bust.

From GE’s Buck Creek operations in Lufkin, to well services companies in Longview, to the oil and gas offices in downtown Houston, the workforce that can’t seem to get a day off during boom times is staring at a lot of down time during the bust. What if instead of forced periods of unemployment, these same folks could transition to working on our state’s massive civil infrastructure projects? Upgrading and repairing our roads, bridges, ports and rail lines requires the same (or nearly the same) type of engineering skills, skilled labor and professional services as oil and gas extraction.

But the best reason to enact a targeted increase is that it wouldn’t be permanent. Just think of it as a disappearing gas tax. It could be just the thing to help us through a period of disappearing gas-related jobs.