
New sources of revenue will be required to meet U.S. infrastructure needs.
The Federal Highway Administration reported last month that 2008 revenues into the Highway Trust Fund fell $3 billion from 2007 levels. It seems that $4 per gallon gasoline earlier this year suppressed driving nationally by almost 90 billion miles in the 12 months since October of 2007, the most significant and sustained decline in driving in more than two decades.
The Federal Highway Trust Fund was already expected to go broke by FY 2010. But this drop in revenue may accelerate that crisis to the current fiscal year. It also serves as a stark reminder that with declining VMT and improving fuel efficiency eroding the motor fuel tax’s contribution, the U.S. must find a better way to pay for transportation projects.
The need is all the more pressing as discussions on SAFETEA-LU reauthorization shift into high gear. Some experts have called for scrapping the existing surface transportation funding bill altogether and developing a new agenda for federal transportation policy. But either way, the nation’s infrastructure needs are considerable. Earlier this year, a national commission found that it would take $225 billion per year for 50 years to bring the nation’s roads, bridges, and transit systems to a state of good repair and create an enhanced and modernized transportation system.
Transportation policy wonks have been having fun developing alternative revenue proposals, which MTR summarizes here:
Raise the federal gas tax. The federal gas tax has held steady at 18.4 cents per gallon since 1997. Proposals range from an immediate 5 cent increase to a 40 cent increase phased in over five years. Others have called for raising the federal gas tax by as much as 80 cents. With national gasoline prices now under $2.00 per gallon, a steep gas tax increase should be much more palatable for the public, and their elected leaders. Still, if and when the country embraces alternative fuel vehicles, transit, or more fuel efficient vehicles, gas tax revenues will begin to diminish once again.
Index the federal gas tax to inflation. In 1997 dollars the current federal gas tax of 18.4 cents per gallon has been eroded by inflation to just 13.6 cents. Had the tax been indexed to inflation beginning in 1997, it would now be 24.8 cents per gallon. As a general rule of thumb, every penny of gas tax brings in $1.9 billion, so simply adjusting the tax for inflation today would produce an additional $12 billion over the year. This idea is a no-brainer, but again, higher fuel efficiency, alternative fuels, and greater transit use will work against the gas tax’s ability to raise revenue for transportation projects.
Make the federal gas tax a sales tax. A sales tax which produces greater per gallon revenues when prices are high would help defray at least some of the revenue lost when people drive less. It would also serve to convert some of the pain drivers feel at the pump to tangible road, bridge and transit improvements, instead of profits for oil companies.
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