Plan Would Help Fill Gap in Highway Funding

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By Rob Ryan

Despite much discussion in Washington about the need for more substantial investment in infrastructure, nothing much has been done.

House Transportation and Infrastructure Chairman Bill Shuster (R-Pa.), however, recently unveiled a proposal that would help address — for a decade, at least — the chronic shortfall in the federal highway and transit trust fund.

Shuster’s plan would raise the federal gasoline tax from its current level of 18.4 cents per gallon to 33.4 cents per gallon. It would raise the diesel fuel tax from 24.4 cents per gallon to 44.4 cents per gallon.

Many lawmakers have resisted past proposals to raise these taxes but have failed to suggest good alternatives.

Under Shuster’s plan, the increases would be phased in over three years. However, it would eliminate the taxes entirely after 10 years. A commission would be tasked with recommending a new revenue model for the highway fund.

The proposal would likely produce a significant increase in revenue for the highway fund. Given the gap between federal revenue and spending plans for transportation, such an increase is badly needed.

The Congressional Budget Office (CBO) projects that the trust fund will be exhausted by 2022. On the assumption that current spending levels continue beyond 2022, CBO projects that the the trust fund would have a shortfall of $192 billion over 10 years.

The pattern in recent years has been to remedy shortfalls with transfers of general revenues. According to CBO, general revenue transfers have totaled $144 billion since 2008. These transfers, however, are nothing more than a bookkeeping patch that undermines fiscal discipline.

Chronic shortfalls in the highway trust fund prevent us from pursuing much-needed repairs and improvements in highways and other infrastructure. Such infrastructure work is a good example of investment spending that can help foster economic growth.

A bipartisan chorus of lawmakers agreed with President Trump’s earlier call to increase investment in infrastructure, but little action has been taken in part due to a lack of consensus over how such investments would be paid for.

Lack of comprehensive, long-term action on infrastructure has long been a problem. While Congress has used general revenue to top up funding for the highway trust fund on multiple occasions in recent years, it has not voted to raise motor fuel taxes since 1993.

The value of revenue from the current fuel taxes has declined sharply over the past 25 years due to inflation. Rising fuel efficiency has also had a negative impact on revenue from the taxes.

Increasing fuel taxes is a straightforward way to fund highway work, with the people and companies that use highways paying the most for them. As The Concord Coalition has argued in the past, the highway trust fund would be in a stronger position if it had a dedicated revenue stream that is indexed to inflation.

The commission that Shuster envisions would be hard-pressed to find a reasonable replacement for fuel taxes that could be enacted but it’s worth the effort.

Shuster’s proposal is a step forward in the debate over fiscally responsible investment in our nation’s infrastructure. It is also a reminder to Congress and Trump that the highway trust fund’s projected exhaustion must be addressed.

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