Bipartisan report argues for ‘one last increase’ in diesel tax

Former congressmen from opposite sides of the political aisle contend that a 15-cent-per-gallon increase in the federal diesel fuel tax will be needed to stabilize the Highway Trust Fund (HTF) and buy time before transitioning to a vehicle miles traveled (VMT) user fee.

“This is the only short-term option that will adequately cover all near-term needs and maintain the user-pay principle,” according to the report, “A Roadmap for the Last Gas Tax Increase,” published Thursday and co-authored by former U.S. Reps, Bill Shuster (R-Pennsylvania) and Joe Crowley (D-New York) for the Bipartisan Policy Center, which supports lobbies for multiple industries.

“As a former member of the House Ways and Means Committee, I know how hard a vote [on raising fuel taxes] can be for members,” Crowley said in a statement. “But importantly, done now and indexed for inflation, it could be the last time members are asked to vote on a gas tax. Transitioning to a new system that recognizes the need to green our transportation sector through more efficient cars and alternative vehicles like electric vehicles is the best means to ensure the longevity of the federal program.”

The report was released a day after the U.S. House of Representatives released a $760 billion infrastructure strategy that focuses on clean-energy initiatives and which House Democrats consider a starting point for negotiating a long-term surface transportation reauthorization bill, which is funded principally by the HTF. The current law, known as the Fast Act, is set to expire at the end of September.

The report notes that because the last fuel tax increase in 1993 (to 22.4 cents a gallon for diesel and 18.4 cents a gallon for gasoline) was not indexed to keep pace with inflation, and because vehicle fuel efficiency has improved, the tax has lost over 40% of its purchasing power over the past 27 years.

Shuster and Crowley estimate that increasing the federal tax on diesel as well as on gasoline and special fuels by 15 cents before fiscal year 2021 and indexing it for inflation would generate $291 billion in additional revenue to cover HTF spending over the next 10 years. This amounts to almost $30 billion in extra revenue per year, they point out, which would cover projected average annual shortfalls of $20 billion while providing “wiggle room” to phase in increases.

This “one last increase” in fuel taxes would pave the way for a 10-year transition to a VMT, a user fee charged for each mile traveled. The American Trucking Associations (ATA), while a staunch supporter of raising fuel taxes to stabilize the HMT, has been less supportive of a VMT — although ATA President Chris Spears has acknowledged the concept as a longer-term approach that his group is willing to discuss.

To account for the effect heavier and lighter vehicles would have on roads and bridges, a VMT fee would need to take into account vehicle weight, according to the report. It pointed out that proposed “smart” road usage charge systems that support GPS features can distinguish between road types, which would give a more accurate assessment of maintenance costs based on road surface materials.

The Federal Highway Administration’s Surface Transportation System Funding Alternatives (STSFA) grant program has already begun administering $95 million in competitive grants to test new ways to finance highway and bridge projects, the report noted. “The upcoming surface transportation reauthorization should dramatically expand the STSFA grant program and mandate that each state DOT develops and begins testing a plan to implement a VMT user fee, deploying the best practices derived from existing pilots.”

The authors also recommended that in the next infrastructure bill, Congress should:

  • Roughly synchronize spending with user tax/fee receipts;
  • Periodically analyze all HTF user taxes and fees to ensure costs are fairly allocated to different classes of system users;
  • Ensure more beneficiaries of the HTF pay into it by, for example, reinstating the diesel tax for passenger trains, eliminating reduced user fees on fuel for intercity and local buses, and levying a modest user fee on bicycle tires; and
  • Support electric vehicle ownership while ensuring their drivers contribute to the HTF.