AASHTO’s gas tax plan

When it comes to the federal gasoline tax, there are two things that are clearly not secrets. One being that it is the primary funding mechanism for national highway infrastructure repairs and maintenance and the other being that the tax has not been raised in 15 years.

In this congressional climate, the specter of raising this tax to get the Highway Trust Fund closer to solvency instead of having to count on continuing resolutions from the federal government to keep funding at existing levels intact for relatively short periods of time is all but nil.

The reason for not raising the gasoline tax from its current levels of 23.4 cents for diesel and 18.4 cents per gallon of gasoline which has not increased since 1994? By most accounts, the common refrain tends to be “a lack of political will.”

Be that as it may, political will does not make laws and influence decisions, actual votes and more than just political posturing do. And with the current Congress agreeing to disagree on all matters large and small, it is hardly a surprise that we are seemingly talking about the same issues affecting the supply chain and logistics sector on an annual basis.

But I digress….when it comes to the gasoline tax, recent news from the American Association of State and Highway Transportation officials (AASHTO) is somewhat encouraging.

Last week, AASHTO unveiled a proposal for Congress that it said would “convert the federal tax on gasoline and diesel fuel from a cents-per-gallon basis to a percentage basis, a mechanism that could raise revenues to pay for greater highway and transit investment if the price of fuel rises in future years.”

According to AASHTO, the gas-tax option outlined would entail an 8.4% tax on a gallon of gas instead of the current 18.4-cent gas tax, and the tax on a gallon of diesel would be 10.6% instead of the current 24.4 cents. AASHTO added that it estimates the changes would potentially raise an additional $43 billion over six years, assuming the price of gasoline increases as the government projects.

By raising $43 billion over six years, this change in the gasoline tax would result in an average increase of more than $7 billion per year in revenues and would enable the next surface transportation reauthorization bill to fund $330 billion in new projects, compared to $287 billion funded under SAFETEA-LU which expired on September 30, 2009.

And how about this for one more daunting number: even with these proposed changes, AASHTO estimates that the country will still need $565 billion for the next six-year transportation reauthorization bill, meaning even with these proposed changes there would still be a $235 billion funding shortfall.

These numbers do not lie. On top of the prolonged economic situation, even with some evidence of a modest recovery afloat, more needs to be done to get the country and the freight economy back on track. Taking a closer look at making overdue changes to the federal gasoline tax may be a good step in that direction, when one considers the massive funding shortfall we are facing.