National Transportation Leader Calls for Federal Fuels Tax Reform

Gasoline price war in Louisville in 1954. Image – Louisville Courier-Journal.

Congress should enact a new economic stimulus program and reform federal fuels taxes to fund significant increased investment in transportation, says AASHTO’s retiring Executive Director John Horsley. These actions “could create thousands of jobs, stimulate economic recovery, and improve mobility in every state,” said Horsley.

Congress “should pass legislation authorizing a $50 billion Transportation Regional Infrastructure Project (TRIP) bond program. Under a bill co-sponsored by Sen. Ron Wyden (D-OR) and Sen. John Hoeven (R-ND), every state would receive $1 billion over six years to be invested in transportation. The U.S. Treasury investment would be paid through U.S. customs fees and no debt would be incurred by the states.”

Horsley also suggests Congress should “convert the “cents per gallon” federal excise tax on fuels to a sales tax on fuels. He said such a move could avert a looming transportation fiscal cliff. Forecasts show that the federal Highway Trust Fund could become insolvent by October 2014, which would cut annual federal highway investment from $41 billion to $6 billion and annual transit investment from $11 billion to $3 billion.”

DC.Streetsblog’s Tanya Snyder notes that “When the federal gas tax was set at 18.4 cents per gallon, it represented 17 percent of the cost of a gallon of gas. Now it’s barely 5 percent.”

The idea was immediately panned by some transportation stakeholders as being too volatile. These critics suggest that under Horsley’s proposal, revenue would be up and down and perhaps impossible to predict, therefore hampering planning. The critics point to the difficulties transit agencies are having, relying on sales tax revenue. But that criticism confuses a sales tax on goods with a sales tax on fuels.

A sales tax on goods, with at least some of the revenue going to transportation, makes some sense.  After all, the transportation network is used to send and deliver probably all goods. But the idea is less politically acceptable than Horsley’s idea. Virginia Governor Bob McDonnell is championing the idea for his state but has received a decidedly unenthusiastic reception.

AASHTO staff comment that “Under Horsley’s proposal, sales tax rates on fuels would be set at a level that restores solvency to the Highway Trust Fund. The fund is currently spending $15 billion more annually than the revenues it receives. The change would support spending on highways and transit over the next six years at $350 billion. If the program were limited to expected excise tax revenues, it would have to be cut to $236 billion.

“Fully supporting the program through highway user fees, rather than through transfers from the U.S. Treasury, would reduce the federal deficit by $150 billion over 10 years,” Horsley said. “The cost of the reform to taxpayers would be less than $1 per week, per vehicle.”

Horsley retires on February 1 after leading the national association of state DOTs for 14 years. He formerly worked at USDOT.

Sources:

AASHTO Executive Director Calls for Transportation Investment, Tax Reform for Highway Trust Fund Solvency,” AASHTO Journal, January 18 2013

Outgoing AASHTO Director: Assess Gas Tax By the Dollar, Not By the Gallon,” Streetsblog DC, January 17, 2013

Bob McDonnell Gas Tax Proposal Would Fund Virginia Roads With Higher Sales Tax Instead,” Richmond Times-Dispatch, January 9, 2013

 

Here’s a video highlight of Horsley’s remarks from AASHTO, running about two minutes: