Four Options to Keep the Highway Trust Fund Solvent

MAP-21 expires on September 30, 2014. The following year, the Highway Trust Fund will be insolvent according to the CBO. Alternatives involve user fees paid by motorists: the gas tax and VMT fee, and two others that bear no connection to driving.

Adam Snider lists the pros and cons of "the most talked-about" options that legislators will consider to pay for the reauthorization or extension of MAP-21. In addition to fiscal urgency, Snider notes that funding the Highway Trust Fund "has gained extra attention with last month’s collapse of an Interstate 5 bridge in Washington state (and) the Metro-North rail crash in Connecticut."

  1. Raising the fuel excise (per gallon) tax - or following the current trend of moving toward a "percentage tax on wholesale gas prices".
  2. Vehicle-miles-traveled (VMT) fee.
  3. Tap oil and natural gas drilling royalties (proposed by Speaker John Boehner in Nov. 2011 and President Obama last March, though for different purposes).
  4. More transfers from the general fund.

Of the four options, only one has been implemented consistently in recent years.

Transferring money from the general fund to the Highway Trust Fund (HTF) has been the routine over the past few years. It’s how the (three) years of (nine) extensions leading up to MAP-21 were paid for and also offered part of the funding source for last year’s bill. And technically, general fund transfers don’t need an offset.

(S)ince 2008, Congress has shifted $41 billion from the general fund, with another $12.6 billion already authorized for 2014.

Perhaps it's only when all four options are considered that the 'pros' of raising the gas tax stand out as the most practical means to keep the HTF solvent, notwithstanding "a recent Gallup poll (that) found that two-thirds of drivers oppose a gas tax hike, even if the money goes to roads."

  • It "can’t be slapped with the fatal “new tax” label — it’s been around for more than 50 years.
  • It’s also one of the cheapest taxes to collect, offers little room for fraud and has a proven collection mechanism. Most gas stations would need only a few keystrokes to update their per-gallon price to reflect the increased tax.
  • And a strong coalition supports hiking the tax, including some unlikely allies like labor groups and the U.S. Chamber of Commerce. The Chamber rarely supports tax hikes, a point supporters hope to hammer home over the next year.

Another gas tax increase variant would be to index the excise tax as proposed by Rep. Peter DeFazio (D-OR).

Full Story: Old tax, new fees among options for highway funding


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