Transportation advocates are encouraged by a proposal this week from Sen. Barbara Boxer (D-Calif.) to increase funding for road and infrastructure projects.
Boxer, chairwoman of the Senate committee that oversees transportation policy, said this week she is considering eliminating the 18.4 cents-per-gallon federal gas tax in the next surface transportation appropriations bill in lieu of a wholesale tax on oil purchases.
The gas tax, currently paid at the pump by automobile drivers, has paid for road and transit projects since the 1930’s. However, with Americans driving less since the 2009 recession and cars now getting better gas mileage than ever, the gas tax is no longer bringing enough money into the Highway Trust Fund to keep up with the cost of transportation projects.
AFL-CIO Transportation Trades Department President Ed Wytkind said that makes Boxer’s proposal to sever the ties between the gas tax and transportation funding intriguing.
“We’re very open to any serious-minded proposal to fix the insolvency problem in the Highway Trust Fund,” Wytkind said. “We continue to believe the most straight-forward way is to update the fuel tax because it hasn’t been updated in 20 years, but with that said, the sales tax approach is viable enough to be considered. If it’s set at the level it needs to be, it could generate enough revenue.”
The last time Congress increased the amount of taxes that are paid by drivers when they purchase a gallon of gasoline was 1993.
Since then, the average price of a gallon of gas has gone from $1.04 per gallon to $3.56 per gallon, according to the U.S. Energy Information Administration (EIA).
Despite the increase, drivers have continued to pay $18.4 cents per gallon into the trust fund that pays for maintenance of the roads they drive on.
Transportation advocates have argued that the gas tax has not kept up with the cost of inflation in construction projects. The consequence, they say, is a $20 billion shortfall between the approximately $35 billion the gas tax generates per year and the more than $54 billion per year Congress is currently spending on transportation projects.
The Congressional Budget Office (CBO) has warned that the Highway Trust Fund could be empty in 2014 if Congress does not make any changes to its current funding structure.
Boxer said during a hearing this week that her proposal to tie transportation funding to wholesale oil purchases would provide enough funding to prevent that from happening.
“There are many ideas out there, and the one that I’m leaning toward myself, although this is going to be a decision of the [Senate] Finance Committee … 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 continued. “It’s a very exciting idea.”
The last transportation bill that was passed by Congress in 2012 was paid for with a package of trust fund sweeps and fee increases in addition to the money from the gas tax. The cobbled-together funding package was only enough to cover transportation spending for two years, unlike other road and transit funding packages that have historically lasted five or six years.
Wytkind said the 2012 transportation bill amounted to “kicking the can down the road,” which he said would increase the amount of funding that would ultimately be necessary to fully fund transportation projects in the U.S.
“The last time there was a serious debate about what to do with the [highway trust fund] program, it got sort of hijacked by kicking the can down the road,” Wytkind said. “The problem is, each time there’s a delay, the price tag goes up.”
Wytkind said he liked Boxer’s proposal because it keeps transportation funding “pegged to the price of fuel.
“Instead of a certain amount of cents per gallon, it’s a percentage,” he said. “The question is where in the stream it’s taxed.”
Boxer did not reveal specific percentages in her statement about eliminating the pay-at-the-pump gas tax.
She said switching to a wholesale tax could provide “sustainable funding for transportation.”
“I’ve seen some ideas that are quite compelling on how to do this,” she said. “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. This could bring in more
than all of the other taxes bring in for transportation.”
Wytkind said he was glad Congress was talking already about a potential new permanent funding source for transportation projects. The current law that provides transportation funding is scheduled to expire in September 2014.
“This is a discussion that needs to be solved soon,” he said. “The insolvency is a problem that isn’t going to be solved by speeches. It’s only going to be solved with real money.”
But Wytkind said his optimism was tempered by the larger debate in Washington in recent days about keeping the federal government funded at all.
“It’s a difficult conversation to have…in a week when you have a group of people who are willing to shut down the government,” he said, referring to House Republican efforts to link keeping the government open beyond Oct. 1 to defunding President Obama’s health care law.