Aii Asks: What’s the best way of funding surface transportation infrastructure?
Question:
Policymakers and politicians seem to generally agree that America’s infrastructure is need of a facelift. But when it comes to paying, neither party seems willing to advance a plan for these much needed updates.
Our policy team asks, “In a hypothetical scenario where retaining the status quo is not an option, in your opinion, which of the following is a better way to fund increased spending on surface transportation infrastructure?”
Answer A:
Increase gasoline/diesel taxes which have traditionally paid for highways; or
Answer B:
Replace gasoline/diesel taxes with new user fees on everyone who drives in order to raise more revenue.
Answer:
As the Highway Trust Fund (HTF) runs at a deficit and high fuel efficiency vehicle, hybrid vehicle, and electric vehicle (EV) penetration continues to increase, policy makers are looking for solutions in funding the United States’ interstate highway system.
In short, the problem is twofold: 1) the gasoline and diesel fuel excise taxes used the fund the HTF haven’t increased in decades and are not pegged to inflation; and 2) nearly all vehicles on the road today are more efficient, i.e. consume less gasoline, than the vehicles on the road when the current gas tax was put in place (this includes EVs, which don’t use gasoline at all).
None of this in and of itself is bad, of course. However, it does call into question the “user pays” formula the HTF has long relied on by eliminating the relationship between the wear and tear each driver is responsible for and how much the driver contributes to the fund. A recent legislative discussion draft from outgoing House Transportation & Infrastructure Committee Chairman Bill Shuster proposed reinstituting “user pays” by doing the following:
1) Increasing the gasoline and diesel excise taxes periodically through 2028 to keep the HTF solvent, then eliminating them completely in 2028.
2) Ultimately, the excise taxes would be replaced with:
a. Implementing a pilot program on vehicle miles traveled (VMT) fee structure, i.e. drivers are taxes based on their road usage rather than fuel consumption.
b. Eliminate subsidies for certain public transit programs.
c. A new small excise tax on diesel fuel for certain passenger trains.
d. A new 10% fee on the wholesale price of batteries used to power EVs.
e. A new 10 percent fee on the wholesale price of bicycle tires (only those used for adult bicycles).