Why I Endorse Higher Fuel Taxes

Lisa Mullings, President and CEO

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You won’t often see an industry association urging Congress to increase taxes, but that’s what NATSO is doing.

Our federal fuel tax rate has been shrinking for decades. It’s been more than 20 years since Congress last raised the per-gallon gas tax, and a recent report by the Financial Times reveals that U.S. investment in infrastructure has hit its lowest level since 1947.

The fuel tax is a fixed rate per gallon, making it impossible for funding levels to keep up with inflation. Since 1993, inflation has eroded the buying power of those 18.4 cents to just 11 cents. To a far lesser extent, gains in fuel economy erode the fuel tax, too. Better vehicle fuel economy means fewer taxes for every mile driven.

The Institute on Taxation and Economic Policy concluded that if Congress had tied the gas and diesel tax rates to inflation and gains in fuel economy beginning in 1997, today we would have raised an additional $215 billion for infrastructure.

Seventeen states and the District of Columbia have similar “variable rate” taxes on motor fuels. Unfortunately, Congress has failed to fix the federal fuel tax.

Wasting Drivers’ Time

Congestion and poor road conditions are costing us billions of dollars every year. If Congress had changed the gas tax to vary each year back in 1997 based on inflation and fuel economy, it would stand at 29 cents per gallon. If we increased the federal gas tax to this level, the average American would pay just $4.66 more every month in gas taxes. However, that tax money would not simply disappear; it would be dedicated to improving commutes and lowering the cost of transporting goods. The average American wasted $818 sitting in traffic in 2011, according to Texas A&M researchers; that same year, congestion cost the trucking industry $27 billion.

Infrastructure investments strengthen the economy. That’s why highway user groups such as the American Trucking Associations support a tax increase for its members. But NATSO has another reason for backing an increase: If Congress fails to act, many businesses could pay a big price. Alternatives to a higher federal fuel tax, such as interstate tolling and rest-area commercialization, threaten businesses that serve interstate travelers.

Other Threats

As states bear more of the burden of the federal government’s failure to act, we expect that Congress will be more willing to consider dangerous proposals. State departments of transportation continue to ask Congress to overturn the federal ban on rest-area commercialization. With budgets stretched, states would like to set up concessions agreements at interstate rest areas and compete directly with you, selling food, fuel and other items to motorists.

In 2012, NATSO defeated an attempt to overturn the law. While the lopsided 86-12 Senate vote rejecting rest-area commercialization is likely to discourage future support for the concept, the issue could resurface as Congress begins considering a new reauthorization in 2014. NATSO will continue to educate members of Congress on the contributions of interstate businesses to the economy and how unfair competition from state-run rest-area concessionaires would jeopardize the highway service industry.

Tight budgets and declining fuel tax revenues are forcing states to look at tolling as an option for funding infrastructure. While tolling of existing interstates is prohibited except under a federal pilot program, many transportation stakeholders would like to see this program—limited to three slots—expanded. Some would like to see the tolling prohibition lifted completely.

NATSO and the Alliance for Toll Free Interstates (www.tollfreeinterstates.com) will work to ensure that existing interstates remain free of tolls, and will advocate for repeal of the pilot program. In the 15 years of the program, though many state DOTs have attempted to implement tolling under it, all have failed. In each case, tolling proposals were met with overwhelming public opposition.

Nearly everyone agrees that we need more money for infrastructure. Will this funding come from minor tax reform and, yes, a tax increase? Or will states be forced to raise fuel tax rates even higher to compensate? Worse, will Congress permit states to toll interstates, which would threaten businesses near the interstates?

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