This week both the House Ways and Means Committee and the Senate Finance Committee are holding hearings to discuss how to deal with the looming insolvency of the Highway Trust Fund (HTF), and how to sustainability finance the nation’s transportation investments in the long-term.
In written testimony submitted to both committees, ITEP’s Carl Davis explains that the core reason the HTF is in crisis is that the federal gas tax is poorly designed. On October 1st, the 18.4 cent federal gas tax rate will have gone precisely 22 years without being increased. Over this same period of time, however, the cost of transportation construction has risen by 60 percent. A stagnant gas tax rate coupled with inevitable inflation in the construction sector is a recipe for unsustainability.
In his testimony, Davis discusses how many states are leading the way with reforms that boost the gas tax’s long-term yield by allowing the tax rate to grow over time. He also explains why experimental taxes on each mile driven are a promising long-run idea, but cannot raise revenue in the short-run and are susceptible to some of the same problems as the current gas tax. Finally, Davis’ testimony notes that repatriation tax proposals actually lose revenue in the medium- and long-terms, and that these policies encourage corporations to conduct more of their operations offshore (either on paper or in reality).