Be sure to mark September 30 on your calendar. It is important on a few different fronts, one being the day that the most recent SAFETEA-LU reauthorization ends and the other being that is the day that the federal gasoline tax expires.
These are both important and relevant issues to be sure, but today I am focusing on the latter.
I am sure you already know this, but here are some quick facts about the federal gasoline tax:
1-it is 23.4 cents for diesel fuel;
2-it is 18.4 cents for gasoline;
3-it serves as the primary funding mechanism for national highway infrastructure repairs and maintenance; and
4-it has not been raised since 1993, when a saxophone-playing President named Bill Clinton was jamming in the White House.
These points are all old hat at this point, but that fourth one always gets me. 1993, really? The gasoline tax has not been raised since I was a senior in college and my beloved New York Rangers last raised Lord Stanley’s Cup. Wow.
Well, as it turns out, the looming expiration date of the tax is getting more attention as it gets closer.
An editorial in The New York Times this week pulls no punches on the topic, stating that if the tax expires and does not get an extension of any kind, “it would bankrupt the already stressed Highway Trust Fund, with devastating effects on the country’s highways, bridges, mass transit systems and the economy as a whole.”
What’s more, the NYT observed that this tax accounts for about 90 percent of the $37 billion Highway Trust Fund, which has received myriad transfers from the Federal Government to remain solvent. And when state taxes are factored in the editorial said that we Americans pay about 43 cents per gallon in taxes.
On a more alarming note, a Politico report pointed quoted a transportation advocate as saying that with so many other fiscal concerns consuming Washington it is being viewed as a low priority even as the days on the calendar inch closer to September 30.
There are many members of Congress that appear to be willing to let the tax expire and let it be. That is their right, and they are entitled to their opinion. But as James Oberstar said at this year’s NASSTRAC Conference there is no such thing as a Republican Road or a Democratic Bridge.
In short, transportation spending and its subsequent benefits for goods movement, passenger mobility, and the overall economy cannot be overlooked or dismissed. This is not a partisan issue in any way. It is an issue that requires our attention in getting something meaningful done.
There are some very good ideas kicking around that could greatly help to augment the federal gasoline tax and keep in solvent in the future. Given the incredibly high level of petulant politics on display these days, it is hard to determine if any of them will ever come to fruition. But let’s take a quick look at a few anyhow.
-In October 2010, the American Association of State and Highway Transportation officials (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.
On to the second one.
A November report issued by President Obama’s bipartisan commission charged with reducing the national deficit, led by Alan K. Simpson, former Republican Senate leader, and Erskine B. Bowles, White House Chief of Staff under President Clinton, suggested to gradually increase the gas tax by $0.15 to fund transportation spending beginning in 2013.
The report stated that raising the gasoline tax would “dedicate funds toward fully funding the transportation trust fund and therefore eliminating the need for further general fund bailouts.”
Both of these ideas make sense, but it is clear nobody is biting yet. Will they gain traction in the future remains anybody’s guess. But the next time you are wondering why a shipment is late due to poor road conditions or terrible traffic, you likely won’t have to look too far to figure out why nothing is getting done—especially if the deadline for this tax comes and goes without any meaningful action taken.