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By Katie Cross, Senior Associate,
Blakey & Agnew
Outgoing House Transportation and Infrastructure Chairman, Congressman Bill Shuster (R-PA), published a discussion draft in July. Intended not as legislative text but instead to spur conversation on Capitol Hill about U.S. infrastructure needs, the bill suggested many reforms to existing infrastructure funding mechanisms. Chairman Shuster described the proposal as having four parts: 1) reforming the Highway Trust Fund (HTF); 2) strengthening investment; 3) utilizing innovative financing; and 4) accelerating project delivery. While reforms included implementing a One Federal Decision permitting process at the U.S. Department of Transportation, extending the most recent Federal surface transportation authorization bill, the Fixing America's Surface Transportation (FAST) Act, by an additional year, and calling for national pilot program to study the viability of a vehicle miles traveled (VMT) tax program, perhaps the most talked about piece of the proposal had to do with the gas tax.
It's a tale well known – as the buzz surrounding a potential infrastructure plan has increased over the past two years, some stakeholders have been making increased noise about finding a solution to the issues facing infrastructure funding, including HTF insolvency. The Federal gas tax, comprised of a federal tax on both gas and diesel fuels, has remained stagnant since 1993 – it has not been raised nor was it indexed to inflation. This means that the 18.4 cents per gallon tax on gas and the 24.4 cents per gallon tax on diesel have seen a decrease in purchasing power over time, buying around 40 percent less today than in 1993. Beyond the ever eroding purchasing power, the amounts of revenue collected by the gas tax continue to decrease as vehicles have become increasingly more fuel-efficient.
However, the gas tax remains the main source of revenue for the HTF. Earlier this year, the U.S. Chamber of Commerce introduced a proposal calling for a 25 cent increase in the gas tax over a five year period. Other groups have proposed their own numbers: the American Trucking Association called for a 20 cent per gallon user fee, to be imposed at the terminal rack, while the National Association of Manufactures has advocated for a 15 cent increase. However, in recent months as focus has shifted to elections and away from introducing new legislation, the talk around gas tax has decreased. Chairman Shuster's proposal, in an attempt to restart conversation, called for a 15 cent per gallon increase in the gas tax and a 20 cent per gallon increase in the diesel tax. The increases would be phased in over a three year period, after which time they would be indexed to inflation. Then, in 2028, the Federal gas tax would be eliminated, to be replaced with another funding mechanism for the HTF. While the Chairman is leaving Congress at the end of this year, he expressed a hope that the
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proposal will continue to spur dialogue on the Hill and help future lawmakers come to decisions as the end of the FAST Act approaches in 2020.
Not all Members of Congress think increasing the gas tax at all is the route to take. In late July, Congressman Curbelo (R-FL) introduced the Modernizing America with Rebuilding to Kick-start the Economy of the Twenty-first Century with a Historic Infrastructure-Centered expansion (MARKET CHOICE) Act. The bill would create a $24/metric ton carbon tax, to be increased by two percent above inflation every year and by an additional $2 should the U.S. fail to reach emission reduction goals set out in the bill. Additionally, the bill would eliminate the Federal gas tax completely and instead 70 percent of revenues collected by the carbon tax would fund the HTF.
While Congress considers whether or not to address the gas tax, either by raising it or by eliminating it completely and replacing it with another revenue generator, states have been increasing their own gas taxes. President Trump's infrastructure outline, released earlier this year, called on states and localities to bring more funding to the table to reduce the Federal contribution. For years, states have been doing just that. This year alone, seven states moved to increase their gas tax. However, some states are finding that raising their own infrastructure revenue can be more difficult than expected. Last year, California's legislature passed a 12 cent gas tax increase, a 20 cent diesel tax increase, and created a transportation improvement fee. The state estimated that the fees will generate $52 billion for California transportation needs over the next 10 years. However, an initiative to repeal the recent increases will be on the ballot in November. Should it pass, it would require any new transportation fuel taxes or road usage fees to be passed by a majority vote of California residents and would retroactively apply to the beginning of 2017 – meaning the deal passed by the state legislature last year would be repealed. This repeal effort could seriously hurt the Administration's hopes that states will bring more of their own funding to the table and, should it pass, could potentially deter other states from even trying in the future.
Blakey & Agnew, LLC is a public affairs and
communications consulting firm based in
Washington, DC.
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