Using corporate stock buybacks to fund the Federal Highway Trust Fund might be the answer.
Any planned phase-out of fossil fuel cars with electric cars will most likely need an overhaul that replaces the gas tax with a new funding source. Currently, America's Highway Trust fund depends on collecting gas taxes at 18.4 cents a gallon for gasoline and 24.4 cents a gallon for diesel.
The first federal gas tax started in 1932 to fund public works projects related to roads and it was one cent a gallon. The Federal Highway Trust fund was created in 1956 to fund the construction of the Interstate Highway system and it was three cents a gallon.
The Federal Gas Tax was last raised in 1993
The Federal Highway Trust Fund collected 41 billion dollars in gas tax money in 2018.
Meanwhile, the capacity of the Interstate Highway System, with the bulk of it built between the 1950's and 1970's, has not kept up with steady car population growth, causing massive traffic jams.
Amtrak's passenger railroad network can barely get train speeds to surpass those from the 1920's due to it sharing a lot of its tracks with freight railroads and the number of railroad crossings.
Another big source of tension for the federal Highway Trust Fund is that gasoline cars have to compete against non-automobile uses like public transportation and pedestrians for scarce highway funding from the trust fund fueled by gas taxes.
Fossil fuel lobbyists and anti-public transit opponents will often bring up the federal gas tax collecting funds for infrastructure while public transit siphons some funding away from car-specific programs to spend it on non-car uses.
The biggest argument against public transit and other non-automobile projects is the Highway Trust Fund is funded by drivers buying gas and driving on public highways that are mainly paid for by gasoline-powered car use. With gas-tax-based highway funds being so limited, the "don't you dare spend one cent of my gas tax money on your blasted bike paths and subway train rides" mentally has set in.
Meanwhile, as the overall car population grows and the costs of construction projects rises, the existing gas tax can't keep up with funding demands. The current quick-fix funding solution is to try to raise local gas taxes by a few cents and turn once-free roads and bridges into toll roads.
A long term proposal is to impose a Big Brother-style of GPS systems on everyone's cars to keep track of where they drive and tax them for every mile. This, however, would invade people's privacy.
Proposed gas tax hike
The United States Federal Government's current proposals would have them raise the federal gas tax 5 cents to 25 cents in 2019 or 2020, but even that seems unlikely. Rising the gas tax 5 cents to 25 cents would have the most realistic chance of passing Congress, but that can only buy so much time before a new source of funding would be needed.
On July 4th in 2019, states such as Virginia raised their state gas and diesel taxes 7 cents a gallon along Interstate 81 to fund several Interstate highway safety projects.
Fees on electric cars
The most extreme case of raising the gas tax in 2019 came when the State of Illinois raised their's from 19 cents a gallon to 38 cents a gallon on July 4th. Illinois also raised their electric car fee from $35.00 dollars every two years to $248 dollars a year in 2019.
Originally, Illinois had wanted to raise the electric car fee to a $1,000 a year, which would have been the highest tax on anything related to owning a car in the United States. The Illinois electric car tax of $1000 dollars a year would have cost owners more than buying a $25,000 car brand new off the dealer lot in that state.
The State of Virginia, meanwhile, has a $64 a year fee on EVs and hybrids. It was passed using the argument that electric cars don't pay their fair share on Virginia's roads.
But even with these EV fees, more electric cars will arrive on roads over the next few years. An example is the electric car maker Tesla building 7,000 to 10,000 new electric cars a week at their factory in California.
Gas will be gone
The year 2035 will most likely be the year the last public gasoline station shuts down. After the year 2040, gasoline might become a specialty item sold in cans on store shelves like in the pre-gas station age of the 1910's in rural America.
The first solution — raising the gas tax a few cents at a time — will most likely only work another five to ten years at best. The second solution, of adding tolls to existing free roads, adds more costs to people's daily commutes and hurts low wage workers.
An example is the State of Virginia, which has started putting tolls on once-free roads. They added adjustable-rate toll lanes down the center of Interstate 95 in northern Virginia. In the 1990's the HOV lanes that once ran down the center of Interstate 95 in northern Virginia used to be free. Now the HOV lanes have variable tolling that can amount to over $20 dollars a trip.
The State of Maryland is also looking at building an $11 billion toll road proposal which would widen Interstates 495 and 270 and Interstate 95 with a system of express hot toll lanes. They are building toll lanes now versus simply adding one or two new 12-foot wide lanes to each side of the existing interstates.
A lot of state highway departments say that when they add toll lanes they don't have funds to add new general-purpose lanes, and that highway capacity should now be based on supply and demand. If you can't afford express lane tolls, you sit in traffic sometimes for two or three hours which further separates the Haves from the Have-nots.
Another funding proposal involves adding a GPS system to track people's mileage and charge them by the mile. It's another bad idea that, for one thing, invades people's privacy. But the reality is the currently proposed funding sources such as GPS tracking and adding tolls to existing free roads or raising the gas tax will also harm low wage workers with long commutes.
It's not uncommon for people to commute 50 or 60 miles one way to work as a store clerk due to the cost of living in a lot of places. If you make $9.50 an hour, getting hit with a new $4 toll each way on a commuter road that used to be free can really eat people up alive.
The ultimate solution
What is needed is a way to tap Wall Street's wealth to pave the streets of Main Street. That new funding source could be taxing corporate stock share buybacks.
Corporate stock buybacks are when a corporation uses its revenue to buy back shares of its own stocks to reduce the amount of free-floating shares still on the market. An example of this is as follows: a corporation has 10,000 shares of stock valued at $500 a share. It then spends $500,000 to buy back 1,000 shares of its own stock.
This should boost the stock's price for its remaining investors by removing free-floating shares on the market. The corporation's CEO, meanwhile, is given a bonus of 250 shares, so they sell those off at 500 dollars apiece to collect $125,000 in cash to pay themselves. The corporation is able to boost its stock price to $600 dollars a share.
The company meanwhile didn't have to invest in the latest tech or spend anything on research and new products. The corporation also lays off 1,300 workers and opens a new factory overseas but the value of the company still goes up.
But what if the plan goes sour?
The CEO, meanwhile, is seen as good at boosting the stock price so they get another 50 shares of stock at $600 a share. But then, something causes the stock price to crash to $300 dollars a share when, say, a rival invests in a new product.
At 1,000 shares of stock valued at $300 a share, this is $300,000. This causes $200,000 in real money that this company spent to get burned up in the stock market. The money was lost simply by the stock price dropping, destroying the real money the company used to fund the stock buyback.
That's $200,000 dollars that could have been used for worker's wages, new products, or tech discoveries but instead was lost to fund stock buybacks. Stock buybacks themselves are not evil when done in moderation. If a company has a good quarter and all of its workers are making a minimum of $17 an hour, none of them need government handouts. While at the same time the company has launched a new product line.
Then, a corporation having a large set of stock buybacks wouldn't a big deal for society. The trouble is stock buybacks are getting out of control in terms of the size and frequency. They have become like a severe drug addiction.
Instead of companies having stock buybacks when they are in good shape, a lot of companies are eating themselves alive to fund them. Even when their stores and products need major investments and upgrades to stay in the market place. Corporations are also throwing their workers under the bus to fund stock buybacks.
It's not uncommon for a lot of corporations to have tons of workers on starvation wages, food stamps, and public assistance while they fund sets of $5 to $20-billion stock buybacks, which are larger than the GDP of several small nations.
The large corporate tax breaks in 2018 were intended to create more jobs and encourage companies to invest in America, but instead caused corporations to go wild on stock buybacks with over $1.1 trillion in stock buybacks in 2018.
Over the last six years, there have been over $5 trillion in corporate stock buybacks.
Meanwhile, despite record profits and stock prices, corporations have fired tens of thousands of workers to fund these massive stock buybacks despite getting huge tax cuts from the federal government.
Another fun fact about stock buybacks is they used to be illegal before 1982 when they were considered a way for a company to game its stock price.
How could this fund roads?
Here are two versions of how taxing corporate stock buybacks could fix the federal highway trust fund.
Collecting corporate stock buyback taxes for the Highway Trust Fund would take the stress off the trillion-plus-dollar transportation improvement backlog off of the low and middle classes and place it on Wall Street.
Wall Street and the stock market are, meanwhile, at record-setting levels in August 2019 in both profits and stock value, so they can afford to fill in a few potholes on Main Street.
Taking the stress of transportation funding off the low and middle class, and local governments, is going to be needed in the coming age of automation and outsourcing. Not to mention with robots and computers possibly taking away millions of middle-class jobs over the next 20 years, a lot of towns might not have the funds to fix the roads on their own.
Here is how the first corporate stock buyback tax proposal would work.
The first buyback proposal would tax corporate stock buybacks at 3% to 6% and would act to fill in the void left by the declining federal gas tax. This would show the scale of funds collected from 3% to 6% of the $5 trillion in stock buybacks.
This first proposal is not meant to stop or slow down corporate stock buybacks from happening but to simply refill the Federal Highway Trust fund.
Here is how much that could have been raised over the last five years if there had been a 3% tax on the $5 trillion in corporate stock buybacks. $150,000,000,000 in new transportation funding could have been collected for road repairs and transit.
A sample of the needs for bridge repairs is the State of Michigan has over 1,175 bridges in bad shape and needs at least $10 billion to fix them. The State of Pennsylvania needs 3,770 Bridges replaced at a cost of $14 billion. Spending $24 billion on bridge replacements would surely create a lot of jobs in these two states suffering from the closing down of several factories due to outsourcing.
Here is how much could have been raised over the last five years if there had been a 5% tax on corporate stock buybacks it would have created $250,000,000,000 in new transportation funding.
A sample of the scale of the funding is it could be used to replace 410 old overpasses on Interstate 81 between Tennessee and Pennsylvania state line at an average cost of $30,000,000 million a reconstructed Overpass. Along with that widen Interstate 81 to eight lanes would be $12,300,000,000 billion.
Build 20,000 miles of new sidewalks at $500,000 a mile for $10,000,000,000.
Here is how much could have been raised over the last five years if there had been a 6% tax on corporate stock buybacks. It would have produced $300,000,000,000 in new transportation funding. They could dedicate an extra $60 billion into public transit capital funding improvement over 5 years.
On top of these large numbers from the stock buybacks, the existing gas tax would still be around bringing in $30 billion to $41 billion for a few more years.
As for the scale of $300,000,000,000 collected over 5 years, Virginia's State Transportation budget for 2019 was $5 billion, while California's was near $15 billion.
A sample of some of the needs this new road funding could fix is the City of Richmond, Virginia has a $100 million pavement repair backlog and a $50 million sidewalk repair backlog, with some streets not being repaved for 20 to 40 years.
The next proposal for corporate stock buybacks is a more extreme version meant to try to possibly slow down stock buybacks or divert at least 10% to 25% of them from burning real-life money into imaginary money by converting some of it into transportation funding.
Imagine how much would be collected into the Highway Trust Fund if 10% of the $5 trillion in corporate stock buybacks. At ten percent over 5 years that would be $500,000,000,000 over 5 years.
A sample of this scale is the State of Virginia currently has $15 billion worth of 300 unfunded "Smart Scale" transportation improvement projects fighting one another for funding.
Amtrak currently has a $40 billion backlog of railroad projects on its northeast corridor between Washington, DC and Boston, and a $5 billion backlog on its keystone corridor between Harrisonburg, Pennsylvania and Philadelphia.
Corporate stock buybacks taxed at 15% is $750,000,000,000. At this scale the impossible transportation projects become possible. At this level of new funding, they could create a national system of fully grade-separated railroad main lines that would give railroads the same fully grade-separated treatment as the Interstate Highway System.
$5 trillion in corporate stock buybacks taxed at 20%, the same as India is currently proposing, would raise $1,000,000,000,000 in new transportation funding over 5 years.
With that sort of funding, the possibilities are endless.
A word of warning
The fact is that this transportation funding proposal could trigger the largest inflow of revenue into America's transportation system. This big funding proposal could become prone to big waste if some rules are not put into place before states and towns and cities get this new funding.
The first rule that should be put into place is that there should be a federal ban on states using federal funding to build new virgin roads until all the existing bridges and pavement scores a 95% or better in a state.
The second rule should be the federal government should avoid funding projects that are too big to fail. Basically, they should limit how much federal funds are put into any one mega project at a time.
This is but one way to approach transportation funding. It avoids electric car fees and avoids raising gas taxes. In a way, it's taking money from wealthy corporations and using that to fund transport. It's not taxing the poor or targeting EV owners. It might work or it might not. Leave us your thoughts in the comments below.