One of the most important roles of a government is to build and maintain infrastructure – without a sound transportation network, not much else matters. If Wisconsin is to be, in the words of Gov. Scott Walker, “open for business,” the state must make sure it is a place where companies actually want to do business. If our infrastructure is not kept up to par with that of other states, companies will simply choose to go to a state with a properly maintained transportation network.

In light of this, the newly revised estimates from the Legislative Fiscal Bureau showing the state’s transit fund will be running a deficit are particularly bad news. The fund, which was originally predicted to have a $12.6 million surplus, is now projected to run a $63.5 million deficit by 2015, largely due to decreased revenues from the state’s gas tax. 

This deficit is alarming for a state that is very much in need of both new jobs and rejuvenated infrastructure. Something must be done to remedy this situation – unfortunately, it’s far from certain that Wisconsin’s government will take the needed action.

Because of the importance of strong infrastructure to the state’s economic growth, which has been lacking, simply cutting transit spending is not a viable solution to this problem. Doing so would only further dampen an already stagnant recovery. A better, although almost certainly more controversial, approach would be to increase the state’s tax on gasoline.

Currently, Wisconsin taxes “motor vehicle fuel” at a rate of $0.309 per gallon. While increasing this tax rate would be somewhat of a financial burden to Wisconsinites, it is a far better option than simply cutting transit spending.

The fact of the matter is tax increases are nearly always unpopular. And for good reason – everyone agrees the government shouldn’t become bloated, people just disagree about what actually constitutes “bloated.” However, this black-and-white view is overly simplistic. Simply rejecting all tax increases out-of-hand is a ridiculously inept policy. In some cases, taxes can have a clearly positive impact on society. This is one of those cases.

Besides replenishing the badly depleted transit fund, an increased gas tax would also correct for the negative externalities involved with burning fossil fuels. Whenever someone burns gas, they’re incurring an additional cost on the rest of society – the cost of the added pollution caused by their consumption. In economics, a Pigouvian tax corrects for precisely these types of externalities. Adding a tax to the market price of a good with negative externalities forces the person purchasing the good to more fully internalize the costs associated with their consumption, in the hope that they will reduce their consumption to a level closer to socially optimal level. In this case, those costs are pollution.

A higher gas tax would do more than discourage driving, though. It would also push people to drive more fuel-efficient cars (not that I’m not a fan of totally unnecessary SUVs.) This, in turn, would likely encourage car companies to invest in developing cheaper, better fuel-efficient vehicles. This is a perfect example of how well designed incentives can lead to a far more desirable outcome for society.

An added benefit of increasing the gas tax is that it would be paid by the people who drive the most. In other words, the brunt of the cost of closing the deficit in the transit fund would be borne by those who use Wisconsin’s roads the most.

Whenever possible, raising taxes should be avoided. This is especially true with regressive taxes, like a gas tax. With Wisconsin’s economy still struggling to keep up with the rest of the country, this is far from the ideal time to be raising any taxes. However, we do not have the luxury of doing nothing, and increasing the tax rate on gas is far better than the alternative solution of cutting transit funding.

Joe Timmerman ([email protected]) is a sophomore majoring in math and economics with a certificate in computer science.