Who Will Pay for Highway Funding?

May 13, 2014

The Highway Trust Fund, the main source of federal funds to build and maintain roads, is running low. Lawmakers are in agreement that the system needs funding, but there is less agreement about the best way to raise revenue, according to a report in the Wall Street Journal.

A total of 1,001,874 miles of roads in the United States receive federal funding. According to the Congressional Budget Office (CBO), the highway trust fund is on track to drop to $2 billion by September 30, and its mass-transit account will drop to just $1 billion. The Transportation Department says that it may halt construction cost reimbursements to states as early as this summer unless more money comes into the fund.

The CBO estimates that the U.S. needs an additional $18 billion to maintain highway funding through fiscal year 2015. Lawmakers are looking at a number of ways to raise the funds:

  • Currently, the federal tax on gasoline (18.4 cents per gallon) and diesel fuel (24.4 cents per gallon) provides the majority of the trust fund's revenue. The tax levels have remained the same since 1993, but many House Republicans are unwilling to raise the taxes.
  • Some lawmakers want to impose new taxes on overseas earnings of multinational companies to pay for highway funding.
  • In 2012, Congress used "pension smoothing" to raise revenue for the most recent highway bill. Pension smoothing increases an employer's taxable income by allowing employers to delay contributions to their employees' pension plans.
  • Other plans to increase funding would establish more toll roads or impose taxes based on mileage.

In the past, disagreement over the proper mechanism to raise highway revenue has resulted in a transfer of funds from the Treasury's general fund into the highway trust fund. Since 2008, $54 billion has been moved from the general fund into the highway fund.

Source: Kristina Peterson, "Highway Funding Faces Bumpy Road," Wall Street Journal, May 8, 2014. 

 

Browse more articles on Tax and Spending Issues