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Friday, September 5, 2008

Our Failing Gas Tax

Today (9/5/08), Department of Transportation Secretary Peters released a statement on the dire need for Congress to pass legislation to provide $8 billion of funding to the Highway Trust Fund. She is quite blunt about the failure of Congress to take action earlier despite warnings that gas tax revenues were down and there was a pending shortfall. Per the statement:

"The Secretary said the legislation was needed now because Congress had failed to heed over three years of warnings from the President and the Department about the long-predicted highway trust fund shortfall. She added that the recent and sudden decline in American driving and the resulting decline in gas tax revenue during the summer had accelerated the predicted shortfall."

(See 7/28/08 post for earlier DOT announcement on HTF issue with data on the changes.)
(H.R. 6532 was passed by the House and sent to the Senate on 7/23/08.)

The problem is going to continue to grow, particularly as states and the federal government continue to find ways to encourage people to use less gasoline. There are federal and state incentives for alternative fuel vehicles that use less gasoline. Consumers are also far more eager to get fuel efficient cars today than when gas prices were much lower and SUVs were the cool vehicle to drive (that also led to greater purchase of gasoline).

The federal gasoline tax is based on a fixed amount per gallon. If it were instead a percentage of the price, the Highway Trust Fund would be doing much better today.

Legislators need to inlude the gas tax and Highway Trust Fund in their work on incentives for alternative fuel vehicles. We can't just move part of our transportation system into the 21st century - we need to bring all of it in. Alternatives to consider include:
  1. A tax based on miles driven (which should also better equate to wear and tear on the roads).
  2. A modification to the funding mechanism for the Highway Trust Fund - including an increase in the gasoline excise tax.
  3. A carbon tax with a portion dedicated to the Highway Trust Fund (see 6/08 post).

What do you suggest?

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