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President Barack Obama delivers the State of the Union address. Photograph by Larry Downing — AFP via Getty Images

Obama’s Smart Transit Plan Hinges on Oil Tax

Feb 08, 2016

This week, the Obama administration is expected to release a budget plan that would put more than $300 billion over the next decade into carbon-reducing transportation technology. As the President hinted in his State of the Union Address last month, the plan would be funded in large part by a $10 a barrel tax on oil.

A White House statement previewing the proposal frames it primarily as a response to the threat of climate change, pointing out that transportation accounts for 30% of U.S. greenhouse gas emissions. The new proposal, according to the White House, represents a roughly 50% increase in U.S. investments in clean transportation infrastructure. That would include increased funding for high-speed rail, mag-lev, and autonomous vehicles.

The plan will also include incentives that realign transportation planning at the state and local level to better prioritize mass transit, smarter land use, and clean transportation investment. That would push back against a longstanding and single-minded emphasis among state Departments of Transportation on decreasing driving delays, primarily by expanding highways. Critics—increasingly including Federal administrators—have said that emphasis has become counterproductive.

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A per-barrel tax on oil is broader than a tax on gasoline, but would have similar effects at the pump. Politico estimates that a $10 per barrel tax could raise gasoline prices by as much as 25 cents per gallon. As we explored following the State of the Union address, such an increase would in theory shift driver behavior to better reflect the environmental costs of cars, encouraging more use of alternatives like biking and mass transit.

The White House argues, though, that the plan would be economically beneficial in the long run, as increased funding would defray what it says is a more than $190 billion in “hidden taxes” imposed on families and businesses by the declining state of existing transportation options.

This is a bold proposal—and it can afford to be, since it’s a largely symbolic gesture from a lame-duck executive facing an uncooperative legislature unlikely to even give it a serious hearing. The Obama administration, though, has already taken concrete steps to promote its vision, including signing a transportation bill last year that defended funding for bicycle infrastructure and provided more than $4 billion in funding for automated vehicle research.

Regulation, though, remains the Obama administration’s most viable tool in shifting the nation’s transportation landscape. The U.S. Department of Transportation is expected to release guidelines for autonomous vehicles within the next six months, with the goal of streamlining innovation. Federal authorities will also soon roll out new performance standards for state DOTs, adding environmental and safety goals to the measurement of driving delays.

For more on the future of transportation technology, watch our video.

Future Federal transportation policy hinges in large part on this year’s presidential election outcome, but the Obama proposal could be a preview. Hillary Clinton, the favorite for the Democratic nomination, has released a transportation platform heavy on innovation and green initiatives, while Senator Bernie Sanders last year introduced a massive $1 trillion, five-year transportation infrastructure bill. Among the Republican candidates, by contrast, Senator Marco Rubio has proposed a large cut to gas taxes and the “devolution” of Federal highway funds to states.

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