WASHINGTON -- As Congress tries to find a fix to the pending expiration of funding for the Highway Trust Fund (HTF), experts at the Brookings Institute have proposed one solution: tie the gasoline tax, which funds the HTF, to gasoline prices.
The HTF is an account that supports federal highway and transit projects, and is funded largely by the 18.4-cents-per-gallon (CPG) federal excise tax on gasoline and 24.4-CPG tax on diesel. But since 2008, the fund has continually flirted with bottoming out because the revenue collected from the fuel tax—about $34 billion annually—does not come close to paying for the approximately $50 billion the federal government spends on transportation infrastructure projects.
This is partly because construction costs keep rising, but also because vehicles have become increasingly more fuel-efficient, and miles traveled by Americans have flattened out. Meanwhile, Congress has not raised the tax since 1993, but instead has resorted to periodically shifting money from general revenues to cover potential HTF shortfalls.
To fix this, Brookings researchers Roger Altman, Aaron Klein and Alan Krueger suggest tying the federal gas tax to gasoline prices—in an inverse relationship. As described in the recent paper, “Financing U.S. Transportation Infrastructure in the 21st Century,” when gas prices rise, the tax would be lowered; when gas prices fall, the tax would be increased.
The tax would have a floor and ceiling in this scenario, with the minimum “somewhat” below 18.4 CPG, with the maximum “substantially greater.”
“We propose to gradually phase in this variable tax, to give consumers and businesses the opportunity to understand it and prepare for it,” the researchers said. “In addition, we would index the minimum and maximum levels to an agreed-on measure of inflation. Otherwise, the costs of maintaining transportation investment will rise with inflation, but the funding to pay for these investments will not.”
The researchers noted that if the gas tax had already been tied to inflation it would currently be 30 CPG. In fact, motorists in 1993 paid around 17% of the average retail gasoline price ($1.07) in federal gas taxes, compared to 5% of the average gas price over the past five years ($3.42). Even though gas prices have fallen in 2015, that share of price is one-half of what it was in 1993.
From a long-term perspective, the Brookings researchers suggest federal incentives for states to enact new technologies to collect user fees. The federal government’s role would focus on assisting in the development of the technologies, subsidizing state and local projects that use them and creating a center in the U.S. Department of Transportation that would coordinate research on them.
The federal government could establish national revenue collection standards, so that different states’ electronic toll collection systems would operate with a single transponder. Or it could assist in the development of a smartphone app that works like a transponder.
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