NCPA - National Center for Policy Analysis

Out of Gas: The Highway Trust Fund

September 9, 2015

The federal Highway Trust Fund is running on empty, despite $34 billion in annual revenues dedicated to pay for the Interstate Highway System and other transportation projects, says senior research fellow Lloyd Bentsen IV of the National Center for Policy Analysis.

Due to inflation, the diversion of funds to nonhighway programs and poor government policies, the Highway Trust Fund consistently spends more than it receives in gas tax revenue, resulting in a $1 billion deficit in 2015 alone. It will require another $167 billion in revenue over the next decade to maintain existing highways and bridges.

Some proposed federal gas tax reforms include:

  • Eliminating the Mass Transit Fund and all other non-highway funding through the Department of Transportation, saving $16 billion annually for additional highway funding.
  • Raising the federal gas tax to compensate for inflation since it was last raised in 1993, and adjusting for future inflation, which would bring in 40 percent more, $10 billion a year, in gasoline taxes.
  • Repealing the Davis-Bacon Act, saving $11 billion annually in construction costs.

State gas taxes are the largest source of transportation revenue under the control of state lawmakers, accounting for roughly 30 percent of highway funding.

Several proposed state gas tax reforms include:

  • Linking state gas tax rates to construction cost inflation, the general inflation rate or gas prices.
  • Reforming the state gas/transportation tax and spending structure for state highways or roads only.
  • Changing from an excise tax to a mileage-based driven tax system.

Previous failures by the federal government in its management of fuel taxes leave two major choices: to dramatically reform and amend the way highways are funded or to eliminate the federal gas tax and leave the stewardship of the interstate system to the states.

Source: Lloyd Bentsen IV, "Out of Gas: The Highway Trust Fund," National Center for Policy Analysis, September 2015.

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