TaxVox Why the Highway Trust Fund is in trouble
Richard C. Auxier
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Despite calls for more infrastructure spending from both Congress and the Obama administration, the Highway Trust Fund (HTF), the primary source of federal transportation dollars, is again on the clock after another short-term extension with no financing plan in place. The House Ways and Means Committee and Senate Finance Committee both held hearings on the fund this week. The problem: Neither Congress nor the Obama administration supports increasing the gas tax, which provides more than 85 percent of the HTF's receipts. But the levy has less than half the buying power it did in 1994. Until that changes—or a substitute revenue source is found—the HTF will remain in trouble. [[{"type":"media","view_mode":"default","fid":"128706","attributes":{"class":"media-image aligncenter size-full wp-image-8548","typeof":"foaf:Image","style":"","width":"671","height":"482","alt":"gas_tax_transportation"}}]] Today's political leaders treat increasing the gas tax rate as a radical idea but only a few years ago it was common. The federal gas tax was increased significantly three times between 1982 and 1994. But during the past two decades of inaction inflation and the cost of transportation have eaten away at the purchasing power of the tax. Congress last raised the gas tax from 14.1 cents per gallon to 18.4 cents in 1994. Adjusted for inflation, the current gas tax rate is 11.5 cents in 1994 dollars—nearly 3 cents less than what it was before Congress raised it. But that's only half the story. The HTF pays for transportation infrastructure and the cost of related construction materials and other inputs has increased more than inflation in recent years. When adjusted for transportation costs, the current gas tax rate is only 8.4 cents in 1994 dollars—half the current statutory rate and less than the nominal 9 cent rate that took effect in 1984.
Primary topic Federal Budget and Economy
Research Area Federal budget