Only Fuel Tax Hike Can Deliver on Infrastructure Promise, ATRI Says

November 08, 2017

By David Cullen

Photo: Jim Park

It will take nothing less than an increase in the federal tax on motor fuels if President Trump’s vision for a trillion-dollar investment in the nation’s infrastructure is ever to be realized. That’s the stark conclusion of a new report just issued by the American Transportation Research Institute.

Titled “A Framework for Infrastructure Funding,” the ATRI report found that the “only meaningful mechanism for attaining the [Trump] administration’s vision for a large-scale infrastructure program is through a federal fuel tax increase.”

Authored by Jeffrey Short, ATRI senior research associate, the report also determined that the inefficiency of other funding mechanisms– including mileage-based user fees and increased tolling– will “fall far short of the needed revenue stream without placing undue hardship on system users.” In addition, the report argues for indexing the fuel tax to inflation going forward.

The nonprofit industry research outfit said in a statement that “a federal fuel tax increase will incentivize states to generate multi-million dollar matches to the new federal funds, ultimately moving the United States closer to the infrastructure investment goals proposed by both Congress and the President.”

ATRI also said the report details what will happen if Congress does nothing but kick fuel tax can down the road again. As it is, the federal fuel tax has not been raised in more than two decades.

“While the trucking industry contributes more than $18 billion in federal user fees each year, growing traffic congestion and freight bottlenecks now cost the industry more than $63 billion annually,” the group stated. “The report also indicates that growth of e-commerce will likely slow as freight deliveries fail to meet the real-time demands of U.S. consumers.”

In the report, author Short calls the federal motor fuels tax “a successful model for assessing a road user charge” and notes that states have followed the federal lead with their own state-level fuel taxes.

“Since this tax is assessed on a per-gallon basis, it is directly tied to road usage and vehicle type/size,” he points out. “Unlike tolling, the tax is tied to use of all roadways, and not limited to specific road segments. Additionally, fuel tax collection is a highly efficient process… It is estimated that the cost for collecting federal motor fuel excise tax revenue is just 0.2% of the revenue collected.”

Short also disputed the contention held by “many federal fuel tax detractors” that the fuel tax is unsustainable: “This perceived sustainability issue, however, is largely due to political recalcitrance and an outdated tax rate that has not been increased by Congress since 1993.”

Other key findings and recommendations detailed in the new report include:

• “A newly created federal vehicle registration fee would be the most efficient mechanism to fill funding gaps associated with electric vehicle use.  These fees could be seamlessly implemented using the same systems as those successfully used to collect state registration fees.”
• “A bureaucracy as large as the IRS would be required to collect, manage and enforce a national vehicle miles traveled (VMT) tax on the more than 250 million vehicles registered in the U.S. Additionally, mileage tax evasion would likely skyrocket under a program that can’t “see” non-paying users.”
• “The practice of road tolling continues to be an expensive proposition for collecting highway funds.  While several toll systems slightly improved their administrative efficiency, the majority of toll systems spend more than ten cents of every dollar collected on administrative activities. Many systems are losing money, and almost all privatized toll roads in the U.S. have filed bankruptcy.”
• “In terms of secondary benefits from a fuel tax focus, ATRI’s findings suggest that every U.S. state would experience significant employment gains as a result of a 10 or 20 cent federal fuel tax increase.  In total, states would receive between $15 billion and $30 billion or more annually through a federal fuel tax increase; nearly half a million jobs could be created nationwide with a 20 cent federal fuel tax increase.”
• “According to the literature and public polling data, American taxpayers prefer a federal fuel tax over other funding mechanisms when the revenue is dedicated to transportation infrastructure.”

American Trucking Associations President and CEO Chris Spear commented in a statement that the research “corroborates what many of us have espoused in Washington DC and in every state capital: people are demanding action on transportation investment and the federal fuel tax is the ideal tool for delivering the much needed funding.”