CBO: The Collision Course of Fuel Efficiency Standards and Transportation Revenue

Ann Mesnikoff, Director of the Sierra Club Green Transportation Campaign, looks at the CBO's Highway Trust Fund report on the relationship between fuel economy standards and projected gas tax revenues, and finds it too hypothetical.

2 minute read

May 14, 2012, 10:00 AM PDT

By Irvin Dawid

While a House/Senate conference committee has convened to reauthorize the bill that will fund the federal transportation program, the Congressional Budget Office examines a problem the committee has already encountered: declining fuel tax receipts that are projected to decline even further in the future.

New federal fuel efficiency standards, intended to go into effect in 2017 may save motorists $68 billion in fuel costs by 2030, but may cost the government $57 billion in deprived revenue to the Highway Trust Fund (HTF) between 2012 and 2022.  The latter is one of the findings of the Congressional Budget Office (CBO) in a report released May 2 entitled "How Would Proposed Fuel Economy Standards Affect the Highway Trust Fund?

Mesnikoff agrees that it's important to document how the proposed standards will reduce transportation revenue but takes issue with the time periods used for the projected shortfalls.

Writing in the Sierra Club's energy newsletter, Compass, she indicates that "the CBO notes that improved fuel efficiency would eventually cause annual gas tax revenues to fall by 21% -- in 2040.  For some reason, however, CBO chose to apply that out-year reduction in 2040 to the years 2012-2022." 

The report has a chart showing that HTF stopped meeting the nation's transportation needs in 2008, requiring transfers from the general fund.

"We can increase gas taxes, make it a sales tax, put a fee on each barrel of oil, or we can start paying per mile we drive," Mesnikoff concludes. "There are other ways to generate revenue.  But first, CBO should give us some good math, not a hypothetical."


Thanks to Ann Mesnikoff

Friday, May 4, 2012 in Sierra Club Compass

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