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Future of Highway Trust Fund Takes Center Stage – Federal Gas Tax Increase a Possibility?

 

Last week, the House Ways and Means Committee and the Senate Environment and Public Works (EPW) Committee continued the debate over how to fund the future of our nation’s roads and bridges. The one thing that was clear from the hearings was the lack of consensus among lawmakers on how to find a long-term funding solution to maintain the Highway Trust Fund’s (HFT) solvency.

Congress is expected to consider an infrastructure package this year, however, it remains to be seen whether lawmakers have the appetite to pass it. Some lawmakers have floated raising the gas tax, but the idea has not gained much traction on Capitol Hill. New House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR) supports a short-term gas tax increase as a bridge to solve the nation’s infrastructure funding woes given that a national shift to a vehicle miles traveled (VMT) is unlikely to be feasible for another decade. A VMT is a user fee based on miles traveled that can possibly be tracked by phone apps, in-car diagnostic systems or by other means. To sweeten the deal, DeFazio has proposed lifting the ban on earmarks which have been banned since 2011.

During both hearings, fiscal conservatives continued to discuss devolution which would push the majority of maintaining the nation’s road and bridges to states instead of the federal government. Meanwhile, House Ways and Means Committee Ranking Member Kevin Brady said this week that he doesn’t see a consensus among the GOP for higher motor fuel taxes or a VMT. Brady laid out a three-step process for improving infrastructure — streamlining permitting, attracting private investment and implementing private activity bonds — none of which involve raising revenues. Even House Ways and Means Committee Chairman Richard Neal (D-MA) dodged the question of whether he'd personally support a motor fuels tax increase. Rep. Lloyd Doggett (D-TX) said that a highway spending bill will be difficult to pass this year unless the President uses the full weight of the White House to get it done. However, Doggett is one of the leading democrats demanding Trump’s tax returns so this could thwart any effort to get a highway bill done this Congress.

Meanwhile, members of the Senate EPW Committee also expressed skepticism on whether Congress will increase the motor fuels excise tax this year. Most Republicans focused on streamlining the federal government permitting process including Senator John Barrasso (R-WY) who doesn’t favor a motor fuels excise tax increase. Senator Shelley Moore Capito (D-WV) seemed skeptical that Congress will be able to pass a major infrastructure package before the 2020 elections. "It's either added pressure to get something done, depending on your perspective, or it's added pressure to make sure nothing gets done," she said. To make matters more difficult to pass a highway funding bill, Senate Minority Leader Chuck Schumer (D-NY) has continued his opposition to a gas tax increase.

According to a new report by the Congressional Budget Office (CBO), HTF could run out of money by 2022 if proper funding policies are not put into place. HTF’s highway account that is responsible for providing funding for the construction of highways and highway safety programs could run out of funding by 2022, according to the report. Furthermore, the report says HTF’s transit account, which provides funding for mass transit programs, could run out of money even sooner, by 2021. The current 18.4 cent-per-gallon federal gas tax has been the main source of transportation funding for decades and it has not been increased since 1993. If the gas tax were to have been indexed to inflation, drivers would be paying over 30 cpg for gasoline.

The American Trucking Associations (ATA), which testified this week before the House Ways and Means Committee, still favors a 20 cpg gasoline tax increase while the Chamber of Commerce, which also testified at the same House hearing, is advocating for a 25 cpg increase. President Donald Trump has reportedly said that he supports a 25 cpg increase. According to Politico, since 2011, 33 states have raised their state gas taxes, and 91 percent of state legislators who supported the increases won reelection. Finally, Green New Deal advocates urge carbon taxes to fund infrastructure but that would be a non-starter in the GOP-controlled Senate. The other question remains on how to deal with taxing electric vehicles which also use the road and currently do not pay into the system. Rep. Earl Blumenauer (D-OR) said that House leadership has reserved floor time for an infrastructure bill with a target of late spring. Stay tuned.

 

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