A new proposal from the Washington think tank the Eno Foundation calls on Congress to get rid of the current system for funding federal highways and transportation infrastructure and instead pay for it out of the federal income tax.
The Highway Trust Fund (HTF) currently uses the federal fuel tax to pay for maintenance and improvements to the nation’s 166,000-mile interstate highway system. But because the fuel tax hasn’t been increased since 1993 and politicians are reluctant to ask motorists for more money, it is constantly in danger of going broke.
Bailouts of the HTF since 2008
Since 2008, Congress has transferred a total of $65.3 billion from General Treasury funds to offset shortfalls in the HTF caused by the low federal gas tax.
The Eno Foundation report, which was funded by the Rockefeller Foundation, calls on Congress to scrap the HTF altogether and instead pay for highways out of the federal income tax revenues.
“The US government’s current approach to funding surface transportation is not working,” the report states. It’s no longer a viable solution because the HTF is no longer bringing in adequate revenues “and neither political party wants to take the political risks of increasing it.”
Report’s Release Timely
The report’s release comes at a time when gasoline and diesel prices are approaching their lowest points since 2009.
The current HTF — which taxes gasoline at 18.4 cents per gallon and diesel fuel at 24.4 cents per gallon — expires in May and will need to be renewed by the new Congress, which will have Republican majorities in both houses when it is sworn in next month.
The US federal fuel tax is substantially lower than other industrialized nations. In the UK, motorists pay $3.55/gallon in federal taxes, in Germany it’s $3.43, in Japan it’s $2.00 and in Australia it’s $1.29. Even Canadians pays more than US drivers, 37 cents per gallon.
While the US federal fuel tax is lower than other countries, so is the amount of money it spends on its highways. The US ranked 19th among countries in rankings of its infrastructure. Germany, for example, ranked 10th.
Shift Burden to Income Tax Payers
The Eno Foundation called on Congress to stop bailing out the HTF and instead create a new funding structure that ensures the financial stability of the nation’s highway system.
“The transfers were more accurately viewed as bailouts of a trust fund that Congress has not effectively managed,” the report states in its conclusion, adding that “pay-as-yo-go” principle of user fees paying for transportation infrastructure — such as tolls for bridges and roads — no longer effectively exists.
“The user pay principle works in theory but has not worked in practice, at least as applied to federal transportation funding the United States to date,” the report states.
Maintaining the HTF the way it is not will result in continued “funding uncertainty”, which will lead to even more shortfalls.
Three Possible Solutions
The foundation proposed three solutions:
1. Spend less on highways to reflect lower revenues from the HTF
2. Adopt a hybrid approach that combines general funds with fuel tax revenues (which effectively is what is in place now), or …
3. Eliminate the HTF and pay for surface transportation through the General Fund, most of which comes from federal income tax revenues.
If Congress is unwilling to ask taxpayers to pay more in fuel taxes, the burden must be shifted elsewhere — namely, higher income taxes, the group concluded.
“While this solution represents the most dramatic change from the existing system, other countries have been at least as successful, if not more successful, at providing sustainable and effective funding for transportation without the use of dedicated gas taxes,” the report states.