The federal Highway Trust Fund is going broke once gain. The solution? Raise the gas tax one final time. According to the Congressional Budget Office, the trust fund will run a $12.5 billion deficit this fiscal year, rising steadily to $24.4 billion by 2029. Sadly, this is neither new information nor an unprecedented occurrence. We have seen this movie before. In 2005, Congress authorized a commission to examine the enduring solvency of the trust fund. It examined the long term financing options for the trust fund and, in its final report, sounded the alarm that “the federal Highway Trust Fund faces a near term insolvency crisis, exacerbated by recent reductions in federal motor fuel tax revenues,” urging Congress to act.
During the 14 years since that dire report was published, Congress and successive administrations have avoided the tough questions related to how to pay for the large federal portion of the aging and ailing national transportation infrastructure. But with President Trump, House Speaker Nancy Pelosi, and Senate Majority Leader Mitch McConnell all voicing support for bipartisan infrastructure legislation, now is the perfect time for Congress to take the critical steps necessary to set up the trust fund for a transition that better reflects the changing transportation sector.
{mosads}The Highway Trust Fund is financed through a series of taxes, with 90 percent of its balance coming from an 18.4 cent tax on each gallon of gasoline and 24.4 cent tax on each gallon of diesel sold at the nearly 115,000 gas stations across the nation. The remainder of the balance derives from excise taxes on the sale of motor fuels, trucks and trailers, and truck tires, as well as revenue from taxes on using heavy vehicles.
These taxes amount to approximately $41 billion a year, which is roughly $20 billion less than is needed to meet current demands on the fund. To address the shortfall, a total of $140 billion has been transferred into the trust fund since 2008 to keep it solvent. But as annual deficits grow, it is difficult to see how more general revenue transfers can be maintained for long. Furthermore, these transfers undermine the principle that underlies the trust fund in that those who use the infrastructure should pay for it.
The only short term solution is to raise the gas tax and index it to inflation. But that alone will not solve this. According to the Congressional Budget Office, a 1 cent increase in the fuel taxes would generate about $1.7 billion a year at first, but that annual revenue drops to $1.5 billion within 10 years. The problem is the Highway Trust Fund is a victim of American ingenuity. We have developed more fuel efficient vehicles, including hybrid and electric cars. While those make up less than 1 percent of all vehicles, the figure is estimated to grow to 14 percent by 2025 and to 65 percent by 2050. An increase in the fuel taxes indexed to inflation, therefore, is not enough to ensure the solvency of the trust fund in future years ahead.
We need a new approach. That is why the Bipartisan Policy Center has launched the Great American Rebuild Initiative, which aims to identify realistic and politically viable options for shoring up the Highway Trust Fund in the long term. The initiative relies on the principle that a vote in Congress to increase and index the gas tax this year should be the last gas tax vote Congress takes. The vote, however, will not be easy. Half of Congress views tax increases as anathema, while many others view an extension of fuel taxes as antithetical to pursuing greener infrastructure.
Interestingly, the fact that both sides would view this as an equally tough vote makes it all the more attractive. By committing to make this the final fuels tax increase any member of Congress must accept, both sides can claim a victory. Importantly, according to a recent poll conducted by the Bipartisan Policy Center and the Business Roundtable, three out of four surveyed would support an increase in the gas tax if it meant they would spend less time in traffic due improved road conditions. Additionally, a majority would be willing to shell out at least 10 cents more per gallon.
There is a technologically feasible, financially beneficial, and necessary middle ground for fixing our infrastructure. It is a temporary extension of the fuel taxes while we lay down the groundwork for an environmentally friendly transportation sector. In this moment when all of Washington seems to be rallying around infrastructure, and with the looming Fast Act reauthorization, Congress has a rare opportunity to work in a bipartisan fashion to help transition the country to a greener transportation sector.
Michele Nellenbach is the director of strategic initiatives and leads policy work on infrastructure at the Bipartisan Policy Center. She is a former staff member with the Senate Committee on Environment and Public Works.