New Research: Blame Congress, Not Hybrids, for Road-Funding Shortfall


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Next Tuesday the federal gas tax will celebrate an unfortunate anniversary: 20 years stuck at a rate of exactly 18.4 cents per gallon.  A unique new report from our partner organization, the Institute on Taxation and Economic Policy (ITEP), puts this occasion in context and explains why the gas tax has fallen some $215 billion short of what a better-designed tax would be raising. The report shows that Congress’ embarrassing failure to plan for growth in construction costs is the main cause of our transportation funding gaps.

To hear some gas tax naysayers tell it, hybrids and other fuel-efficient vehicles are consuming so little gasoline that the gas tax can’t possibly raise enough money to keep our infrastructure from falling apart.  But ITEP’s new analysis shows that just 22 percent of the gas tax shortfall we’re experiencing today is due to growth in vehicle fuel-efficiency.  By far the more important factor (accounting for the other 78 percent of the shortfall) has been Congress’ decision to stop the gas tax rate from rising alongside normal growth in the cost of asphalt, machinery, and other construction inputs.

Seventeen states, home to over half the country’s population, now use smarter “variable-rate” gas taxes that tend to rise over time.  And we note that the federal government wisely allows other parts of the tax code to rise each year with inflation—like the personal exemption, standard deduction, and Earned Income Tax Credit (EITC), so similarly giving the gas tax room to grow shouldn’t be that hard.

ITEP’s report offers a better path forward, and explains how reform could have prevented our current funding predicament.  By allowing the gas tax rate to grow alongside both construction cost inflation and fuel-efficiency, the federal transportation fund could have been brought from frequent deficits to consistent surpluses.  ITEP finds that more than $215 billion in additional revenue could have been raised over the 1997-2013 period—money that would have made a real difference in putting people to work and improving the efficiency of our transportation network.

Read the report, A Federal Gas Tax for the Future.

 

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