Jacob Morello contributed to this post.
Earlier this week, Sens. Bob Corker (R-TN) and Chris Murphy (D-CT) introduced bipartisan legislation that would shore up the Highway Trust Fund by increasing federal excise taxes on gasoline and diesel fuel by 6 cents per gallon over each of the next two years and indexing these taxes to inflation thereafter. According to the release, the proposal would raise $164 billion over the next decade, closing the trust fund’s shortfall during that time.
The Highway Trust Fund finances surface transportation and infrastructure projects across the country, including the building and maintenance of roads, bridges, and mass transit systems. The Trust Fund is projected to run short of money within the next couple months and faces a $164 billion shortfall over the next ten years, in part because Americans are driving less and vehicles are becoming more efficient.1 The exhaustion of the Trust Fund would slow transportation and infrastructure projects and create uncertainty for the 700,000 people thereby employed.
The Trust Fund is currently financed by an 18.4-cents-per-gallon tax on gasoline and a 24.4-cents-per-gallon tax on diesel fuel, though general revenues have filled the funding shortfall in recent years. The Corker-Murphy proposal for a 12-cent increase over two years, followed by annual updates in line with the Consumer Price Index, would apply to both taxes – if enacted, the legislation would mark the first federal motor vehicle user fee increase since 1993. The lack of indexation for inflation has eroded revenue collected from the tax over the past two decades.
In addition to the fully offset extension of the Highway Trust Fund, Corker and Murphy have proposed to reinstate and make permanent certain tax preferences that expired at the end of 2013. These provisions are from a set often referred to as the “tax extenders” that includes the research and development tax credit, the state and local sales tax deduction and certain deductions for small businesses. These temporary provisions have been regularly extended in recent years. The tax extender provisions in the Corker-Murphy proposal would not be offset, and, if enacted, the associated revenue loss would be added to the debt.
The gap between surface transportation spending and revenues has turned into a perennial problem – often addressed by stopgap policies – that calls out for a solution with some foresight. Corker and Murphy have stepped up with a logical proposal on the gas tax to resolve that issue for the medium-term; in the long-run, changes in transportation technologies and use patterns could necessitate the development of new models of financing for infrastructure. We applaud the bipartisan efforts of these senators to ensure the fiscal solvency of the Highway Trust Fund, and encourage other policymakers to either get behind this funding approach or propose solutions of their own.
1 The estimates of the shortfall assume that the authorization, which expires at the end of September 2014, will continue as under current law.