Has Fuel Efficiency Been Scapegoated to Avoid Raising the Federal Gas Tax?

Vermont's Transportation Secretary points to increased fuel efficiency as reason to look for an alternative revenue option, favoring Oregon's Road Usage Charge. Meanwhile, U.S. DOT reactivated its "ticker" to warn of funding cutoff after July 31.

4 minute read

June 23, 2015, 10:00 AM PDT

By Irvin Dawid


When a recent post quoted House Ways and Means Chair Paul Ryan as stating, "we can’t just chase fuel efficiency with higher taxes," I dismissed it as an excuse for not raising gas taxes. Ryan went on to say, "There’s not much happening in this economy to help it grow, but lower gas prices is one of them," which is a more common explanation for not raising taxes.

Now comes Transportation Secretary Sue Minter, not a politician who needs to get re-elected or who took a "no increased taxes" pledge, but an official whose main concern is to fund her state's transportation needs, but she sounds a lot like Ryan:

"Minter says revenue from the federal per-gallon gas tax is no longer a stable source of money because many cars are much more fuel efficient," writes Bob Kinzel, VPR's political reporter. [Listen here.]

"In the long run, our gas tax is not a sustainable funding source," states Minter. "And Congress really does need to think about different ways of raising revenues for transportation investments that we so sorely need to keep our economy moving." 

Minter's preferred alternative is the Road Usage Charge in Oregon, though she calls it a "vehicle miles traveled tax" and indicates Washington is also implementing it. According to King5 News, the earliest it would be begin there is 2018.

But in Oregon, 5,000 Oregon motorists will be selected next week to be pioneers in OReGO. They will have a device plugged into their on-board diagnostics (OBD) system that will record mileage, be charged 1.5 cents per mile driven and have the 30 cents per gallon state gas tax deducted. One device, called a dongle, will not have a global position system for those concerned about privacy.

"Some people are advocating that this is a way to go, since so many of our vehicles of the future are not going to depend on fuel,” Minter says.

However, Kinzel's report is not only to have Minter point to OReGO as a gas tax alternative but also to warn what Vermont will face if Congress is unable to reach an agreement on how to fund roads and transit after the current patch bill terminates on July 31.

"If Congress fails to address this issue in the next six weeks, individual states won't be reimbursed for the federal share of these projects," writes Kinzel. "In Vermont that amounts to roughly $6 million a week."

Indeed, Keith Laing of The Hill writes that "(t)he Obama administration is warning state transportation departments that it will have to stop authorizing payments for construction projects on July 31 unless Congress reaches a deal to extend federal infrastructure funding."

The agency revived a Highway Trust Fund ticker Friday that it has used in the past to warn lawmakers of the consequences of allowing the infrastructure funding measure to expire.

"With a shortfall in the Highway Trust Fund approaching, cash management steps are not far away," wrote Todd Solomon in DOT's Fast Lane blog.  "Because the HTF supports critical roadwork by State DOTs, these cash management procedures will slow improvements and basic repairs on roads across the U.S."

Returning to the issue of increased fuel efficiency, there is a reason for it—the Environmental Protection Agency and the National Highway Traffic Safety Administration, itself a division of the U.S. Department of Transportation (DOT), approved new standards requiring auto companies to achieve 54.5 mpg by 2025 almost four years ago.

The auto companies are doing their jobs, at considerable expense, by manufacturing more fuel efficient vehicles. Will Congress do its job of hiking gas taxes to match the declining gas tax revenue that result from "lowering CO2 emissions by approximately 1 billion metric tons," or will they use it as another excuse to simply avoid raising a tax that most motorists don't like paying?

A regulation that will save motorists about $170 billion in fuel costs over the lifetime of the program according to DOT should not be used as an excuse to avoid increasing gas taxes. Otherwise, those same motorists may spend their fuel savings at auto body and repair shops due to bad roads.

Hat tip to Daily Transportation UpdateAmerican Association of State Highway & Transportation Officials (AASHTO)

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