With Less Than a Year to Go on MAP-21, Future of the Gas Tax is Contemplated and Government Shutdown Prompts Concern

This week saw the 20th anniversary of the last time the federal gas tax was raised and there is plenty of evidence that its days could be numbered. Meanwhile this week also marked the start of the one-year countdown to the expiration of MAP-21, the federal surface transportation authorization legislation, in September 2014. But some believe this week’s partial government shutdown should give pause to anyone hoping for on-time approval of a successor to the bill next year.

End of the Gas Tax?

Senate Environment and Public Works Committee Chair Barbara Boxer said last week she wants to end per gallon fuel taxes and suggested that taxes at the oil refinery level, a wholesale tax on oil distributors or sales taxes might be worthy replacements for consideration as part of the next authorization bill. The American Trucking Associations and the AFL-CIO Transportation Trades Department were among those who praised Boxer’s ideas, The Hill newspaper and others reported.

“There are many ideas out there, and the one that I’m leaning toward myself … is to do away with the per-gallon fee at the pump and replace it with this sales fee as they’ve done in Virginia and Maryland,” Boxer said. “It would fund the highway program for six years … I think, and it would do that by doing away with all the other fees.”

Boxer said switching to a wholesale tax could provide a sustainable funding source for transportation.

“Simplify things, get one funding source, follow the lead of some of our states that are turning to a percentage highway fee that is paid at the refinery level,” she said. “This could bring in more than all of the other taxes bring in for transportation.”

One reason the federal gas tax may be falling out of favor is that it is levied at a fixed rate, not a percentage, and therefore has been highly vulnerable to inflation. A new report from the Institute for Taxation and Economic Policy (ITEP) argues that the lack of inflation indexing associated with the per-gallon tax has had a much larger impact on federal purchasing power than increasing fuel efficiency, another oft-cited cause for the erosion of gas tax revenues. While fuel efficiency gains took a 6 percent bite out of the purchasing power of the gas tax between the late ‘90s and 2011, construction cost inflation reduced the tax’s value by 22 percent.

ITEP recommends four main components to reform the gas tax:

  • Increasing it to compensate for the loss in purchasing power;
  • Allowing it to rise over time alongside construction cost inflation;
  • Allowing it to rise over time as vehicle fuel efficiency improves; and
  • Enacting two mechanisms to ensure these tax rate adjustments don’t lead to volatile gas tax collections: using average measures of construction costs and fuel efficiency from the previous few years to smooth the impact that a single atypical year of growth in these measures could have on the tax rate and a backstop limit on changes in the tax rate to prevent it from changing more than 10 percent in a single year, for example.

Emily Goff of the conservative Heritage Foundation offers a very different perspective and plan in a piece this week.

“At the current spending level of $53 billion per year, a six-year reauthorization of the highway bill would cost nearly $320 billion, but the (Highway Trust Fund) is projected to bring in just under $240 billion in gas tax revenue and interest over that time frame,” she writes. “Congress would need to continue unaffordable cash infusions from the General Fund to the HTF—even for a one-year extension—but a tight overall federal budget means they will be less likely to continue this practice.”

Congress has the choice of trying to increase revenues or bring spending in line with projected revenues and it’s the latter approach that many conservatives favor, Goff makes clear.

“The current shutdown teaches Congress a lesson,” she writes. “Less federal and more state and private-sector control of transportation programs mitigate the sector’s vulnerability to budgetary impasses and funding lapses. Business can continue with less disruption than if the sector were more or fully dependent on the federal government.”

Goff argues that Congress should limit the federal role in transportation and empower states by transferring programs like transit and transportation alternatives to states, localities and the private sector; removing what she calls “low-value” or non-transportation activities from the Highway Trust Fund; and improving public and public-private financing mechanisms.

Trucking Industry Concerned About Reauthorization, Future Funding

Count the trucking industry among those very concerned about the poisonous atmosphere on Capitol Hill that resulted in a partial government shutdown this week.

“If Congress can’t even keep the doors of the federal government open, what are the chances for a substantial new highway bill by this time next year?” ponders Kevin Jones of the Commercial Carrier Journal in a blog post. “Developing sustainable, predictable funding for a multi-year transportation plan is where the real action should be in the coming year, and trucking has to be prepared and involved. Piecemeal local government planning and private management of cherry-picked, profitable segments cannot maintain the continental highway system trucking depends on. That’s a job for a fair and focused Congress—and that’s why we all should be worried.”

Other Items of Note

  • Another Take on Tolling, Privatization: That toll finance study by Reason’s Robert Poole that I blogged about recently continues to receive attention. Author Ellen Dannin has a different take on the issue in a piece this week for Truthout. Dannin argues that Poole dubbing his proposal “Interstate 2.0” is a misnomer. “Reason’s proposal actually seems more like version 0.75,” she writes, “in its treatment of the interstates as a closed system, unconnected to non-interstate roads, planes, and trains, and in its lack of concern for problems whose solutions call for less traffic, such as environmental degradation, air pollution, climate change and injuries and deaths caused by interstate accidents.” Dannin sees a more multimodal future with “a transportation ecosystem that is far more varied and useful.” “Rather than encouraging more cars, more trucks, more pollution, less interpersonal connection and more privatized space, people throughout the country are radically changing travel and interpersonal connection,” she writes.
  • HTF Calculator: The American Road and Transportation Builders Association has a new calculator tool on their website that allows visitors to assess the impact of various options for shoring up the Highway Trust Fund. Users can see what happens if funding is reduced in other budget areas, if money is borrowed from the General Fund and if the gas tax is increased. The ARTBA describes the options available to Congress this way: “Let the Highway Trust Fund go over the fiscal cliff; steal from other areas of discretionary spending; borrow from the General Fund and add to the deficit; or raise new revenues.” The calculator shows that a 4.3 cents-per-gallon gas tax increase (like the one 20 years ago) would put the nation on a path toward supporting “all economically beneficial projects” and move us from the “still stuck in traffic” category to the “green light” category.
  • Active Transportation: Advocates of active transportation say walking and biking programs were hard hit by MAP-21’s elimination of dedicated funding for the Safe Routes to School and Recreational Trails programs combined with a 33 percent cut in funding for active transportation and an option given states to cut remaining spending on such programs by an additional 50 percent (which states like Arizona, Georgia, Iowa, North Dakota, Oklahoma, South Carolina and Utah took advantage of). Most believe the policy is unlikely to be revisited in discussions about MAP-21’s successor. That’s prompted active transportation advocates to take the fight to the state and regional level, Streetsblog Capitol Hill reported this week.