Congress

Must Prioritize Highway Funding Fuel Tax Remains Most Effective, Efficient Way to Fund Infrastructure
America's infrastructure is showing signs of age, and unfortunately, the current 18.4 cents-per-gallon fuel tax rate is insufficient to fund both the repair and expansion of our highway infrastructure. To keep the U.S. competitive and facilitate efficient interstate commerce, it is imperative that the federal government address the fuel tax issue and maintain its strong national role in infrastructure development in the next transportation reauthorization. Trust Fund Out of Money: By 2015, the Highway Trust Fund won't be able to meet its obligations, according to a recent statement by the Congressional Budget Office (CBO) to the House Budget Committee. Without addressing the issue, the report says Federal lawmakers would have to cut transportation spending by 92 percent in order to bring revenue and spending in line. The federal motor fuels tax, which is currently 18.4 cents per gallon for gasoline and 24.4 cents for diesel, hasnt been increased since 1993. In addition, Americans are driving more fuel-efficient vehicles and driving less. Congress should no longer delay action on this pressing issue. The cost of doing nothing will cause further decline in our infrastructure, drastically increasing costs, imperiling safety, and ultimately, stifling economic growth. Now is the time to act. Fuel Tax Still the Most Effective, Efficient Solution: In recent years with the prolonged recession, Congress has been hesitant to consider an increase in the fuel tax. However, fuel taxes remain the most efficient and equitable method to raise dedicated highway funds. Fuel taxes are the ultimate user fee or pay-as-you-go approach, which is why they have been used for so many decades to build and maintain our existing infrastructure. Other funding solutions, such as tolling, encounter significant public opposition and are an extremely inefficient means of funding infrastructure. Nearly one-third of all tolling revenue collected is spent on toll collection, even with electronic collections systems. Administering the federal motor fuels tax, by comparison, costs just 0.2 percent of the fees collected. Ignoring the Issue Leads to Unfavorable Solutions: Failing to address the need for increased highway funding at the federal level encourages states to seek alternative funding solutions that are unfavorable to citizens and businesses, such as tolling. Most notably, Virginia, North Carolina and Missouri have sought to toll interstates under a Federal Highway Administration pilot program. None of these efforts has moved forward, however, amid strong public opposition. Tolls result in double taxation on motorists, while threatening residents and businesses with economic hardships, diversion of traffic to less-safe roads, and increased costs for shipped goods. Desire to Adjust Fuel Tax Gaining Momentum: The number of states seeking to generate transportation revenues by increasing their state motor fuel taxes is growing, which could help to generate the political will to make a change at the federal level. Wyoming was the first state this year to raise its fuel tax, raising its tax to 24 cents per gallon from 14 cents. Proposals in Washington, New Hampshire, Michigan, Pennsylvania, Nevada and Vermont are also under consideration. Alternatively, at least 18 states are considering proposals that move away from a cents-per-gallon excise tax and toward a percentage-based sales tax collected at the wholesale level that would keep up with inflation. Virginias newly passed tax replaces the states 17.5-cents-per-gallon tax on gasoline with a 3.5 percent wholesale tax on motor fuels that will keep pace with economic growth and inflation. Maryland also recently reduced the states 23.5-cents-per gallon gas tax by 5 cents per gallon and replaced it with a new 3 percent sales tax at the wholesale level, phased in over two years.

Action Requested: Leadership will undoubtedly consider major changes to the current system as it begins to negotiate the next highway transportation bill. As the collectors of the nations fuel taxes, fuel retailers are in the best position to provide valuable input into how the system works and whether potential changes to it are viable. We ask to be at the table for these discussions to provide feedback on any changes to the current system that may be considered. NATSO staff contacts: Holly Alfano, halfano@natso.com, (703) 739-8501; Brad Stotler, bstotler@natso.com, (703) 739-8566